Types of VAT Schemes

Types of VAT Schemes in The UK

Choosing a VAT Scheme is a crucial decision and essential for the future growth of Business. Today’s correct decision can land you up in a better place shortly. There are different types of VAT Schemes in the UK, and below are the VAT Schemes’ details applicable as per business.

Different Types of VAT Schemes in the UK

    1. Standard VAT Accounting Scheme
    2. Annual Accounting VAT Scheme
    3. Flat Rate Scheme
    4. Cash Accounting Schme
    5. Retail & VAT Margin Scheme

Standard VAT Accounting Scheme

The most commonly used VAT Scheme is Standard VAT Accounting Scheme. A majority of VAT Registered businesses keep a record of purchase and sales transactions. Normally VAT Returns are charged on the Tax point date for your sales and purchase. At the end of each quarter, records are to be filled to HMRC in your VAT Return. You must pay your VAT when it’s due or either reclaim when you have paid more output Tax.

Also read about VAT One Stop Shop (OSS).

Annual Accounting VAT Scheme

The Annual Accounting Scheme is almost similar to the standard VAT scheme. In this scheme, you are not required to file quarterly VAT returns. Instead, you can file your VAT accounts annually on your yearly VAT payment deadline. This might help businesses in maintaining cash flows. For the time being, you need to overpay or underpay your VAT Bill, any outstanding balance needs to be settled by filing for a VAT Refund. Businesses with an annual Turnover of £135,000 or less are eligible for this scheme.

Flat Rate Scheme

In a Flat rate Scheme, you need to pay a fixed percentage of your total Turnover as VAT. Different flat rates of VAT can be used by different businesses. The VAT rate you pay is determined by the sort of business you run. You need to charge VAT on your Invoices and are not required to enter details of every Sales and Purchase transaction. Under the Flat rate VAT scheme, you can claim input VAT on £2000 or more capital expenditure. Businesses with an annual Turnover of £150,000 or less are eligible for the Flat rate Scheme.

Cash Accounting Scheme

As per Cash Accounting Scheme, businesses need to pay VAT based on the business’s payments and received. Businesses must keep records as per the actual payment dates. By using this Scheme, you need to pay VAT on sales that have been completed and paid by the customer. If your business Estimated Annual turnover is less than £1.35m, you are eligible for Cash Accounting Scheme.

Retail and VAT Margin Scheme

There are a variety of retail schemes available, and small businesses can use any of them with cash accounting or annual accounting. A retail scheme with a flat rate VAT plan cannot be combined. Point of Sale Scheme, Apportionment Scheme, and Direct Calculation Scheme are the three standard VAT retail schemes.

If you have any further queries regarding which scheme to choose, outsource bookkeeping & VAT services in the UK, drop us an email at info@accrels.com, and will be happy to schedule a no-obligation call to discuss further.