Combining the VAT Flat Rate and Annual Accounting Schemes

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Combining the VAT Flat Rate and Annual Accounting Schemes

HMRC offers a number of VAT schemes for small businesses aimed to help simplify reporting and aid cashflow management.  Two such schemes are the VAT Flat Rate and Annual Accounting Scheme, but did you know that you can combine these two?  That way, depending on your business, you can put yourself in a VAT advantageous position.

Advantages of Joining Both the VAT Flat Rate and Annual Accounting Schemes

Joining both the VAT Flat Rate and Annual Accounting Scheme can be a smart move:

  • You’ll only need to file one VAT return a year;
  • Better cashflow management, not just from paying a lower rate of VAT over to HMRC but also from a set fixed monthly payment towards your VAT bill

Disadvantages of Joining Both the VAT Flat Rate and Annual Accounting Schemes

  • Your monthly payments are based on reasonable estimates, but if there are any changes to your income you could find yourself making monthly VAT payments that are higher than required.  Although you can apply to HMRC to change your payments, there is no guarantee they will do this and it make take some time to make the changes;
  • If you find yourself making unexpected capital purchases over £2,000 then although you are allowed to claim back the VAT on these you will have to wait until you submit your annual VAT return to claim this back.

How to Join the VAT Flat Rate and Annual Accounting Schemes

You will need to submit application forms as required by HMRC to join the VAT Flat Rate and Annual Accounting Schemes

If you are already VAT registered

HMRC have a single form called the VAT600AA/FRS which covers your application to both schemes.  You can submit this form online and you will need your business details including your existing VAT number to apply.

Alternatively you can print and post the VAT600AA/FRS to:

HM Revenue and Customs – National Registration Unit 
Imperial House 
77 Victoria Street 
Grimsby 
DN31 1DB 
United Kingdom 

If you not currently VAT registered

If you are new to VAT, you can join the flat rate and annual accounting schemes as part of your VAT application. The easiest way to register is online here and it involves setting up a Business Online account with HMRC.  As you go through the application process you will be offered schemes which you are eligible to join, including the flat rate and annual accounting schemes.

Are you eligible to Join the Flat Rate Scheme? Find out Here

Are you eligible to Join the Annual Accounting Scheme? Find out Here