VAT Annual Accounting Scheme

Q: How many VAT Returns do I file under the Annual Accounting Scheme?

You file just one VAT Return per year instead of the standard four quarterly returns. Advance payments are made throughout the year to spread the cost.

Q: Who is eligible for the VAT Annual Accounting Scheme?

You can join if your estimated VAT taxable turnover is £1.35 million or less and you are up to date with all VAT returns and payments. You must leave if turnover exceeds £1.6 million.

Q: How do advance payments work on the Annual Accounting Scheme?

You choose either 9 monthly payments (each 10% of your estimated liability) or 3 quarterly payments (each 25%). The final return settles any over- or under-payment.

Q: Can I use the Annual Accounting Scheme with Cash Accounting?

Yes. The Annual Accounting Scheme can be combined with the Cash Accounting Scheme, giving you fewer returns and payment-based VAT accounting at the same time.

Key facts

File one VAT Return per year instead of four.
Make 9 monthly or 3 quarterly advance payments based on your estimated liability.
Eligibility: estimated VAT taxable turnover must be £1.35 million or less.
The final return adjusts for any over- or under-payment.

How It Works

Instead of filing four quarterly returns, you:^[1]

Make regular advance payments throughout the year (based on your previous year’s liability)
File a single VAT Return at the end of your annual VAT period
Pay any remaining balance or receive a refund

Payment Options

Option	Instalments	Each Payment	When Due
Monthly	9 payments	10% of estimated annual liability	End of months 4–12
Quarterly	3 payments	25% of estimated annual liability	End of months 4, 7, 10

^[2]

Eligibility

Estimated VAT taxable turnover: £1.35 million or less
Must be up to date with all VAT returns and payments
Cannot use if you are in a VAT group

You must leave if turnover exceeds £1.6 million.^[1]

Benefits

Less admin — only one return to prepare instead of four
Predictable payments — instalments are based on last year’s liability
2 months to file the annual return (vs 1 month + 7 days for quarterly)
Can be combined with the Cash Accounting Scheme

Drawbacks

Regular refund claimants lose out — if you normally get VAT refunds, you only get one per year instead of four
Advance payments may be higher than your actual liability (you get the difference back at year-end)
Must still keep records up to date throughout the year for the annual return

Tip: The Annual Accounting Scheme is ideal for businesses with predictable turnover and who owe VAT each period. If you regularly reclaim VAT, quarterly returns give you faster refunds.

How to Join

Apply to HMRC using form VAT600AA or apply online through your Government Gateway account. You can join at any time — HMRC will let you know your start date.^[1]

Frequently Asked Questions

How many VAT Returns do I file under the Annual Accounting Scheme?

You file just one VAT Return per year instead of the standard four quarterly returns. Advance payments are made throughout the year to spread the cost.

Who is eligible for the VAT Annual Accounting Scheme?

You can join if your estimated VAT taxable turnover is £1.35 million or less and you are up to date with all VAT returns and payments. You must leave if turnover exceeds £1.6 million.

How do advance payments work on the Annual Accounting Scheme?

You choose either 9 monthly payments (each 10% of your estimated liability) or 3 quarterly payments (each 25%). The final return settles any over- or under-payment.

Can I use the Annual Accounting Scheme with Cash Accounting?

Yes. The Annual Accounting Scheme can be combined with the Cash Accounting Scheme, giving you fewer returns and payment-based VAT accounting at the same time.

Sources

Annual Accounting Scheme for VAT — GOV.UK
Annual accounting (VAT Notice 732) — GOV.UK
VAT guide (VAT Notice 700) — GOV.UK

Annual Accounting Scheme