When applying to join the scheme turnover must be less than £1,350,000.
Once on the scheme turnover can rise to £1,600,000 before a business will have to transfer back to the standard accruals method.
All new businesses can now join the annual accounting scheme immediately.
Existing businesses must ensure that all payments to HMRC are up-to-date.

Benefits

Business only has to complete one annual VAT return.
The business has 2 months to complete the return from the end of the 12 month period when any balance payment must also be made.
The business has the option to pay either 9 monthly direct debits or 3 quarterly direct debits and a balancing payment.

An example payment profile for a company commencing using Annual Accounting Scheme from 1 January 2019:

Month from Scheme Start	Month	Monthly Payments	Quarterly Payments
1	Jan-19
2	Feb-19
3	Mar-19
4	Apr-19	1st Pay
5	May-19	2nd Pay
6	Jun-19	3rd Pay	1st Pay
7	Jul-19	4th Pay
8	Aug-19	5th Pay
9	Sep-19	6th Pay	2nd Pay
10	Oct-19	7th Pay
11	Nov-19	8th Pay
12	Dec-19	9th Pay	3rd Pay
13	Jan-20
14	Feb-20	Bal Pay	Bal Pay

For further information on the annual accounting basis read VAT notice 732.

Cash Accounting

Eligibility

When applying to join the scheme turnover must be less than £1,350,000.
Once on the scheme there is a tolerance level up to a turnover of £1,600,000.
All new businesses can now join the cash accounting scheme immediately.
Existing businesses must ensure that all payments to HMRC are up-to-date.
When a business transfers back to the accruals basis they have 6 months to bring their payments up-to-date.
You can only transfer to a cash accounting scheme at the start of a tax period.

Benefits

Significant cash benefit to the business as you will only pay VAT to the revenue on sales you have paid for.

For further information on the cash accounting basis read VAT notice 731.

Flat Rate Scheme

Eligibility

For a business to qualify for the Flat Rate Scheme it must meet both of the following criteria:

Taxable sales must be no more than £150,000 per year.
Total income in the year must not exceed £230,000.

Benefits

Using the flat rate scheme is simple and easy to use. Each business type has a percentage rate applied to it for example the percentage for accountancy and bookkeeping business is 14.5%. You then multiply that percentage by your quarterly gross sales including VAT and that is how much VAT you pay to HMRC.
Example. You invoice a client £1,000.00 plus VAT of £200.00, a total gross invoice of £1,200.00. The flat rate for the business is 14.5%. Your payment will be £1,200.00 x 14.5% = £174.00.
You can also claim the VAT on capital assets over £2,000.
The VAT flat rate you use depends on your business type and costs. You get a 1% discount if you're in your first year as VAT registered business.

New rules from 1st April 2017

You will be classed as a "limited cost business" if your goods cost less than either:

2% of your turnover
£1,000 a year (even if it's more than 2% of your turnover).

This means you will pay a higher rate of 16.5%.
If you aren't a limited cost business, continue to use your business type to work out your flat rate.
When working out the amount spent on goods, it cannot include purchases of:

Capital goods (such as new equipment used in the business)
Food and drink (such as lunches for staff)
Vehicles or parts for vehicles (unless running a vehicle hiring business).

For further information on the flat rate scheme read VAT Notice 733.

Flat Rates
Type of business	Flat Rate	1st Year Vat registered %
Accountancy or bookkeeping	14.5%	13.5%
Advertising	11.0%	10.0%
Agricultural services	11.0%	10.0%
Any other activity not listed elsewhere	12.0%	11.0%
Architect, civil and structural engineer or surveyor	14.5%	13.5%
Boarding or care of animals	12.0%	11.0%
Business services not listed elsewhere	12.0%	11.0%
Catering services including restaurants and takeaways	12.5%	11.5%
Computer and IT consultancy or data processing	14.5%	13.5%
Computer repair services	10.5%	9.5%
Entertainment or journalism	12.5%	11.5%
Estate agency or property management services	12.0%	11.0%
Farming or agriculture not listed elsewhere	6.5%	5.5%
Film, radio, television or video production	13.0%	12.0%
Financial services	13.5%	12.5%
Forestry or fishing	10.5%	9.5%
General building or construction services	9.5%	8.5%
Hairdressing or other beauty treatment services	13.0%	12.0%
Hiring or renting goods	9.5%	8.5%
Hotel or accommodation	10.5%	9.5%
Investigation or security	12.0%	11.0%
Labour-only building or construction services	14.5%	13.5%
Laundry or dry-cleaning services	12.0%	11.0%
Lawyer or legal services	14.5%	13.5%
Library, archive, museum or other cultural activity	9.5%	8.5%
Management consultancy	14.0%	13.0%
Manufacturing fabricated metal products	10.5%	9.5%
Manufacturing food	9.0%	8.0%
Manufacturing not listed elsewhere	9.5%	8.5%
Manufacturing yarn, textiles or clothing	9.0%	8.0%
Membership organisation	8.0%	7.0%
Mining or quarrying	10.0%	9.0%
Packaging	9.0%	8.0%
Photography	11.0%	10.0%
Post offices	5.0%	4.0%
Printing	8.5%	7.5%
Publishing	11.0%	10.0%
Pubs	6.5%	5.5%
Real estate activity not listed elsewhere	14.0%	13.0%
Repairing personal or household goods	10.0%	9.0%
Repairing vehicles	8.5%	7.5%
Retailing food, confectionery, tobacco, newspapers or children's clothing	4.0%	3.0%
Retailing pharmaceuticals, medical goods, cosmetics or toiletries	8.0%	7.0%
Retailing not listed elsewhere	7.5%	6.5%
Retailing vehicles or fuel	6.5%	5.5%
Secretarial services	13.0%	12.0%
Social work	11.0%	10.0%
Sport or recreation	8.5%	7.5%
Transport or storage, including couriers, freight, removals and taxis	10.0%	9.0%
Travel agency	10.5%	9.5%
Veterinary medicine	11.0%	10.0%
Wholesaling agricultural products	8.0%	7.0%
Wholesaling food	7.5%	6.5%
Wholesaling not listed elsewhere	8.5%	7.5%

Other Schemes

For further information on other alternative VAT schemes read the following VAT notices:

Retail Scheme (VAT Notice 727).
Margin Scheme (VAT Notice 718).
Capital Goods Scheme (VAT Notice 706/2).
Tour Operators Margin Scheme (VAT Notice 709/5).

Click Here to download the current tax year's abacus Tax Tables pdf booklet

Click Here to download the previous tax year's abacus Tax Tables pdf booklet

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