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Usually, VAT-registered businesses submit their VAT Returns and payments to HM Revenue and Customs 4 times a year.

With the Annual Accounting Scheme you:

• make advance VAT payments towards your VAT bill - based on your last return (or estimated if you鈥檙e new to VAT)
• submit 1 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
• apply for a refund - if you鈥檝e overpaid your VAT bill

The scheme would not suit your business if you regularly reclaim VAT because you鈥檒l only be able to get 1 refund a year (when you submit the VAT Return).

Talk to an accountant or tax adviser if you want advice on whether the Annual Accounting Scheme is right for you.

You can join the Annual Accounting Scheme if:

• you鈥檙e a VAT-registered business
• your estimated VAT taxable turnover is 拢1.35 million or less in the next 12 months

Exceptions

You cannot use the scheme if:

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

Leaving the scheme

You must leave the scheme if:

• you鈥檙e no longer eligible to be in it
• your VAT taxable turnover is (or is likely to be) more than 拢1.6 million at the end of the annual accounting year

How to join the Annual Accounting Scheme depends on whether you鈥檙e registered for VAT or not.

If you鈥檙e not registered for VAT

You should register for VAT and join the scheme at the same time. You鈥檒l be told how to join the scheme when you register.

If you鈥檙e already registered for VAT

Apply to join the VAT Annual Accounting Scheme online or by post.

If your VAT turnover is 拢150,000 or less (excluding VAT)

You may be eligible to join the Flat Rate Scheme. With the Flat Rate Scheme, you pay a fixed rate of VAT to HM Revenue and Customs (HMRC).

If you want to join the Flat Rate Scheme you will need to do this separately. Apply to join the Flat Rate Scheme online or by post.

After you apply

You鈥檒l get confirmation that you鈥檝e joined the scheme:

• sent to your VAT online account - if you applied online
• in the post - if you applied using a paper form

How to leave

You can leave the scheme at any time, but you must leave if you鈥檙e no longer eligible to be in it.

To leave, write to HMRC and they will confirm when you can leave. From this date, you must account for your VAT in the usual way.

Check your VAT Return and payment deadlines in your .

VAT Return deadline

There are 12 months in your VAT accounting period. Your VAT Return is due once a year, 2 months after the end of your accounting period.

Most businesses now need to keep digital VAT records and use software to submit VAT Returns.

Payment deadlines

You must make advance payments towards your VAT bill (either monthly or quarterly) during your accounting period and a final payment when you submit your VAT Return.

How much do you pay

Each payment is either 10% of your estimated VAT bill (monthly payments) or 25% (quarterly payments). The amount is based on previous VAT returns (or estimated if you鈥檙e new to VAT).

HMRC will write telling you when your instalments are due and how much they鈥檒l be.

The final payment (known as a 鈥榖alancing payment鈥�) is the difference between your advance payments and the actual VAT bill confirmed on your VAT Return.

You may be due a VAT refund if you鈥檝e overpaid HMRC.