How to reduce the administrative and cash flow burden of quarterly VAT filings


If you find it difficult to manage quarterly payments to HMRC to settle your VAT, why not consider the VAT Annual Accounting Scheme (AAS)?

Under the AAS you:

  • make nine payments on account towards your annual VAT bill – based on your last returns (or estimated if you’re new to VAT); and
  • submit one VAT Return a year.

When you submit your VAT Return you either:

  • make a final payment – the difference between your advance payments and actual VAT bill; or
  • apply for a refund – if you’ve overpaid your VAT bill.

The AAS wouldn’t suit your business if you regularly reclaim VAT because you’ll only be able to get one refund a year (when you submit the VAT Return).  Also, you can only join the AAS if your estimated VAT taxable turnover is £1.35 million or less.

However, smoothing the cash flow impact of VAT payments can be helpful as is submitting one VAT Return a year instead of four returns.

The Annual Return, and any balancing payment, needs to be submitted within two months of the annual year end date for VAT purposes.

You can’t use the AAS if:

  • you left the scheme in the last 12 months;
  • your business is part of a VAT registered division or group of companies;
  • you are not up to date with your VAT returns or payments; or
  • you are insolvent.

You must leave the AAS if:

  • you’re no longer eligible to be in it; or
  • your VAT taxable turnover is (or is likely to be) more than £1.6 million at the end of the annual accounting year.

For further information on this topic contact Michael O’Brien here.