Managing Value Added Tax (VAT) is a fundamental compliance task for business owners. Once you are VAT registered, one of the first decisions you have to make is choosing your reporting cycle.
Deciding if you want to stick with the standard Quarterly VAT Returns or apply for the VAT Annual Accounting Scheme is quite a tough decision. This decision also directly impacts your cash flow and admin time.
This decision becomes even more difficult when you consider outsourcing accounting VAT returns to a specialist. Let’s discuss both options so you can decide which HMRC VAT filing frequency is the best fit for your company.
Benefits of Quarterly VAT Returns
- Timely Cash Flow Management: Quarterly filing means you only need to settle your VAT bill every three months. This allows you to retain your collected VAT for longer, which can be a significant benefit for cash flow.
- Faster Refunds: If your business often reclaims VAT, filing quarterly allows you to receive your refunds back from HMRC more quickly than waiting a full year.
- Keeps Records Tidy: Filing four times a year means your books are reconciled more times annually. This consistent schedule helps your dedicated accountant to identify errors much sooner.
Benefits of The VAT Annual Accounting Scheme
- Less Admin Work: Since this is an annual task, you only need to prepare and submit one full VAT Return per year. This significantly cuts down on your deadlines and frees up time you can invest in handling other tasks.
- Predictable Payments: While you only file once, you still make nine monthly or three quarterly instalment payments towards your estimated annual VAT bill. This predictability can make budgeting and financial planning much simpler than managing four large, potentially fluctuating payments.
- Easier Outsourcing: For smaller businesses with simple finances, switching to the Annual Scheme before using an Outsourcing VAT Returns service can mean lower annual compliance costs, as the overall administrative effort is minimised.
The Ultimate Decision: Which is Best for Outsourcing?
Ultimately, both Quarterly and Annual options have merit. However, the ‘right’ choice is the one that supports your cash flow and operational efficiency. When you partner with Stellarwiz for your bookkeeping and VAT Returns service, we take the administrative headache away, regardless of your filing frequency. We’ll help you choose the best scheme, manage the submissions, and ensure every deadline is met on time.
Do you want to learn more about our services? Feel free to reach out and book a discovery call today!
FAQs
Will I still have to pay VAT regularly on the Annual Scheme?
Yes. You typically make nine monthly or three quarterly instalment payments towards your estimated annual bill, followed by one balancing payment.
Does the Annual Scheme reduce the amount of VAT I pay?
No. It only changes when you report and pay, not the total amount of VAT you owe or reclaim.
Can I switch from Quarterly to Annual or vice versa?
Yes, but you must meet the eligibility criteria for the scheme you want to join and notify HMRC. You generally cannot rejoin the Annual Scheme if you left in the past 12 months.
