1. Annual VAT Accounting Scheme
VAT-registered businesses typically submit HMRC VAT returns and payments four times per year. However, under the VAT Annual Accounting Scheme, they only need to do it once a year. This single annual return is intended to simplify administration for small businesses. Advance payments towards your company's VAT are made throughout the year, based on your previous year's return (or an estimate if it's your first time). You either pay or get refunded the difference between your actual VAT and your advance amount after submitting your yearly tax return.
To qualify for the scheme, your company must be VAT-registered and have an annual VAT-taxable turnover of £1.35 million or less. If you are insolvent, not up to date with VAT payments or returns, have left the scheme in the previous 12 months, or are part of a VAT-registered division or group of companies, you will be ineligible.
2. Cash Accounting Scheme for VAT
This scheme lets you pay VAT on your sales after customers pay you, then reclaim VAT on your stock after you’ve paid your supplier. This is in contrast to the traditional method of reporting figures and paying tax even when invoices have not been paid.
To be eligible, your company must be VAT-registered and have an estimated VAT-taxable turnover of £1.35 million or less in the next 12 months. You cannot use the scheme if you are already using the VAT Flat Rate Scheme, are behind on your VAT returns, or have committed a VAT-related offence in the previous year.
If you qualify, you can join at the start of the VAT accounting period without notifying HM Revenue and Customs.
3. VAT Margin Plan
Sellers of antiques, secondhand goods, works of art, and other collectors' items use the VAT Margin Scheme. The scheme levies a tax on the difference between what a company pays for an item and how much it sells it for (as opposed to taxing the full selling price).
To participate in the scheme, simply keep detailed records of your eligible goods and report them on your VAT return. These records should include all invoices and a stock book.
The VAT Margin Scheme does not apply to investment gold, precious stones and metals, or anything else you purchased for which you were charged VAT. There are also special provisions for used vehicles, auctions, pawnbrokers, and horses and ponies.
4. Scheme for Capital Goods
Businesses use the Capital Goods Scheme to claim VAT exemption or rebates on assets such as land, property, or equipment that were purchased with the intention of reselling but were instead used for other purposes by their owner. This could be deliberate or the result of a genuine change in circumstances.
The scheme effectively allows businesses to spread the initial VAT claimed on assets over a number of years. If the asset is only used for business purposes, you can reclaim the entire VAT. If you use it for both business and personal purposes, you can claim a percentage of the VAT back – this is known as a ‘partial exemption.'
5. VAT Retail Schemes
VAT Retail Schemes are only available to businesses that make retail sales and have an annual VAT-exclusive turnover of less than £130 million. Businesses that sell both retail and non-retail items may participate in the schemes, but only on their retail sales (they must account for their non-retail sales in the regular way). Different businesses use one of three standard VAT retail schemes:
Point of Sale Scheme – designed for businesses that calculate and record VAT at the point of sale.
Apportionment Scheme – for businesses that purchase goods to resell.
Direct Calculation Scheme – for businesses with a small amount of sales at one VAT rate and the majority of their sales at another.
Now that you have gathered a fair amount of information. We have also articles on capital Goods Scheme for VAT provided in this blog, we can bring the discussion toward wrapping up. In the case at the time of purchasing the asset, there were no non-business activities to ensure that you qualify for the scheme. Here you need to know that you must keep accurate records of the purchased assets to qualify for the scheme
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