Annual Accounting VAT Scheme: Guide to VAT Guide in the UK for small business, sole trader and entrepreneurs– Advantages and Disadvantages
Advantages and disadvantages of VAT schemes for businesses differ from businesses to businesses and from VAT scheme to VAT scheme! In this guide we are going to concentrate on the Annual Accounting scheme
Advantages and disadvantages of VAT schemes for businesses differ from businesses to businesses and from VAT scheme to VAT scheme! In this guide we are going to concentrate on the Annual Accounting scheme
Advantages and Disadvantage of Annual Accounting scheme
Advantages
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You will have the benefit of completing only one VAT return in a year instead of submitting four VAT returns a year
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You can join the scheme as soon as you register or you can join if you are already registered for VAT
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Because you are paying the VAT due in fixed monthly for quarterly amount , you are able to manage your cash flow better
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You are allowed to make additional payments on account if you think you need to. This is good especially if VAT due (VAT liability is likely to be more than the estimated amount at year end).
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You will enjoy the benefit of having two months to complete your VAT Return as well as pay in the VAT due at the end of the year rather than the one month other VAT schemes have !
Disadvantages
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This VAT scheme is not really beneficial to those that claim back VAT on a regular basis. This is mainly because the business owner can only claim repayment once a year.
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Some times, the turnover of a business do decrease in the year, if this happens to you, you will have keep paying at the agreed interim rates i.e. the equal monthly rates, which may mean that you are overpaying VAT until the end of the year before you can claim a refund for the overpayments made on account.
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