VAT annual accounting

VAT annual accounting

VAT Annual Accounting Scheme is suitable for company with annual sales below £1.35 million. If you opt to join VAT annual accounting scheme, your company only file VAT return once a year.

HM Revenue and Customs will set the estimated VAT liability to be paid by your company based on your previous year VAT return, if applicable.

Payment options and arrangement with HMRC

Your company simply makes VAT payment by direct debit or other approved electronic payment methods.

Your company must specifically request payment options to be on quarterly basis if not it will automatically be on monthly basis.

When to file VAT Return

Your company is required to submit your VAT return two months after your accounting year end together with the balance of VAT payment due.

Flexibility of Annual Accounting Scheme

Your company is entitled to request reduction in the interim payments if your sales is well below your previous year.

Your company may request to withdraw from the VAT annual accounting scheme any time by writing to HMRC.

Advantages of VAT Annual Accounting Scheme

  • The scheme provides your company with more predictable cash flow because your company will make regular payments on account throughout the year.
  • Possible cash flow advantage if your annual sales is foreseeable to increase each year.
  • Cut down substantial administrative work because you only need to send in one return per year

Your company must leave the VAT annual accounting scheme if your annual sales reaching and over £1.6 million.

Other VAT schemes available for business are the VAT flat rate scheme and VAT cash accounting scheme.

VAT cash accounting

VAT cash accounting

VAT cash accounting scheme is suitable for your business, if your annual sales are below £1,350,000.

Under this scheme, you still issue your VAT sale invoice the normal way except you only pay the VAT to HM Revenue and Customs (HMRC) when you received the money from your customers. This VAT scheme can give you significant cash flow advantage.

If you allow credit terms to your customers, you do not have to account for VAT on those sales invoices issued in your VAT returns until you have received the monies from your customers. If your customer never pays you, you never have to pay the VAT over to HMRC. Similarly, you cannot reclaim VAT on your purchases until you have actually paid your suppliers.

Your business must leave the VAT cash accounting scheme when your taxable turnover is more than £1.6 million.

There are other VAT schemes available for businesses, VAT Flat Rate Scheme and Annual Accounting Scheme.

Seek accountants advice if you have questions about VAT cash accounting scheme.

Choose your accountants wisely

Choose your accountants wisely

Concise tips in choosing accountants wisely to work with you on your business.

Accountants’ pricing

It is important to obtain couple of quotes from different accounting firms to compare the prices so that you are aware of the market rate and avoid being overcharged. Usually, accountants firm charge their clients by the hour. They will provide you with a quote based on the nature of your business assignment.

Ask the accountants:

  • How many people would be involved in your company’s affairs?
  • How they work out their charging rate?
  • How often they will issue invoice to you? monthly or as and when they complete your assignment.
  • Do they give credit terms, say 30 days from invoice date?
  • Would they communicate with you if they foresee the work involved is going to exceed the original quote given? You do not want to be quoted a fee of £1200 then being given a final invoice of £2000 to pay.

Some accountants firm offer fixed fee accounts packages to limited company. If you are just starting up your business it is best to go for fixed fee accounting package as you know exactly how to pay your accountants.

Accountant’s response time

Ask the accountants what is their response time within the firm? for example, they would reply to clients in 24 hours is their practice norm.

Would they be anyone else that you could contact if you could not get hold of the person in charge of your assignments?

Accountants’ specialist areas in business

Find out the accountants’ core competency. For example, if you have question involving international tax affairs, would they be able to handle or how would they able to assist you to get the result?

The size of the accountants’ firm

Ideally small to medium sized accountants are suitable for small to medium sized businesses.

Large companies are best to go for the big accountancy firms like PWC, KPMG, Deloitte and Ernst & Young and many more.

Attitude of Accountant in charge of your company affairs

It is very important that you have a rapport with the accountant that you would be regularly dealing with. Whether you feel comfortable with the person or with the way he/she handles your assignment.

Let take an example, if you are an impulsive person and you like to get things done fast, you would not be compatible to work with an accountant that has an attitude of managing its clients affairs on strictly first in first out basis.

If you are a positive thinking person, you may find it frustrating to work with an overly prudent accountant who come across almost negatives.

We believe in when there is a will, there will be a way in achieving whatever we want in business and in life. In other words, we can make the impossible possible. Choose like with like is the way to forward.

Convert business assets into cash

Convert business assets into cash

Convert business assets into cash by reviewing your fixed assets register to find which business asset can give you cash.

Fixed assets register is a summary of all assets owned by your company. It should contain information such as the asset description, date of purchase, value of the assets and economic useful life of each asset.

It is a good practice to review and update your company’s fixed assets register regularly to identify surplus or idle assets and to evaluate the condition of your physical asset to its value to ensure it is approximately close to it’s market value recorded.

Convert business assets into cash

  • Sell the surplus fixed assets such as land and buildings, plant and machinery, motor vehicles that your business would no longer need.
  • Assets that could potentially be made surplus and then disposed of, for example by subcontracting out your printing process, your in house printers would become surplus. Do this if it is more cost effective and efficient for your business going forward.
  • You could take advantage of the sale and lease back to get extra cash for the equipment you owned.
  • Hire out underutilized of plant and machinery capacity.
  • Sub let vacant factory and rent out vacant office space.
  • Disposed of separable and sale-able investments such as shares, subsidiaries or any parts of the business like a branch if they no longer serve your core business.
  • Sell idle equipment lying around in the factory or unused office furniture. The chances of the idle business assets being re-used is very small especially if they are stored in the warehouse or a storage room because people often forgot about them.

Cash is king. It is the life blood of your business.

Where to send VAT application

Where to send VAT application

You can apply for your VAT number online or by post.

Your business is required to register for VAT once your sales reached the VAT registration threshold. You may also register for VAT on voluntarily.

Your VAT application forms must be sent to the dedicated VAT office that deal with VAT registration if you are applying your VAT number by post.

You may appoint an accountant to handle your VAT application or you may apply directly with HM Revenue and Customs.

VAT application by post

Send your VAT application to the following HMRC office.

HMRC VAT Registration Service
Crown House
Birch Street
West Midlands

If you have any question about registering for VAT and you do not have representing accountants to deal with your application, you may contact VAT helpline on 0300 200 3700 for advice. They may also be able to help you with questions on how to update your VAT details or request for cancellation of your VAT registered status.

Bought a VAT Registered Business

If you have recently bought a VAT registered business and wish to keep the VAT number, your VAT1 and VAT68 forms must be sent to Grimsby VAT office. The full address is as follows:

Grimsby VAT Registration Unit
HM Revenue and Customs
Imperial House
77 Victoria Street
Grimsby DN31 1DB