The annual accounting scheme allows a trader to complete one VAT return for the year. Depending on the level of turnover, interim payments on account are required, although some smaller businesses are exempt from this requirement. HMRC can refuse entry to the scheme where they consider the revenue needs protecting (Value Added Tax Regulations 1995 SI 1995/2518, reg. 52(2)).
If the trader’s taxable turnover is no more than £1,350,000, he may apply to account for tax for VAT on an annual basis.
In certain circumstances, it may be impossible for a trader to complete the VAT return fully and accurately within the specified time-limits, e.g. by reason of bereavement, fire, theft, etc. Where this happens, the trader may wish to estimate the figures to be entered on the return.
Permission for an estimated return must be obtained in advance from HMRC and they must be satisfied that the trader is unable to account for the exact amount of tax in the prescribed accounting period (SI 1995/2518, reg. 28, 29(3)).
If the estimated return is submitted along with the payment within the prescribed time, the trader will not be in default for the purposes of the default surcharge provisions. Any such estimated returns must be adjusted and exactly accounted for in the next prescribed accounting period.
For peace of mind call KinsellaTax NOW on 0800 471 4546 for help and advice with your HMRC problems.