1. VAT Annual Accounting Scheme
VAT-registered businesses usually hand in their VAT returns and payments 4 times a year. With the VAT Annual Accounting Scheme, however, they only need to do it once a year. This single annual return aims to make administration easier for small businesses. Over the year, advance payments are made towards your company’s VAT, based on your previous year’s return (or an estimate if it’s your first time). After submitting your yearly tax return, you either pay or get refunded the difference between your actual VAT and your advance amount.
To be eligible for the scheme your business needs to be VAT-registered and you need an annual VAT-taxable turnover of £1.35 million or less. You’ll be ineligible if you’re insolvent, not up to date with VAT payments or returns, if you've left the scheme in the previous 12 months, or if you're part of a division or group of companies that are VAT-registered.
2. VAT Cash Accounting Scheme
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 opposed to the usual way of reporting figures and paying tax even when invoices haven’t been paid.
To be eligible your business needs to be VAT-registered and your estimated VAT-taxable turnover for the next 12 months is £1.35 million or less. You can'to use the scheme if you’re using the VAT Flat Rate Scheme, if you’re behind with VAT returns or if you’ve committed a VAT-related offence in the last year.
If you’re eligible, you can join at the start of the VAT accounting period and you don’t have to inform HM Revenue and Customs.
3. VAT Margin Scheme
The VAT Margin Scheme is used by sellers of antiques, second-hand goods, works of art and other collectors’ items. The scheme taxes the difference between what a business pays for an item and how much it’s sold for (as opposed to taxing the full selling price).
To join the scheme, all you need to do is keep detailed records of your eligible goods and then report them on your VAT return. These records should include invoices for all items and a stock book.
There are some exceptions to the VAT Margin Scheme, specifically investment gold, precious stones and metals, and anything you bought that you were charged VAT for. There are also special conditions when it comes to second-hand vehicles, auctions, pawnbrokers, and horses and ponies.
4. Capital Goods Scheme
The Capital Goods Scheme is used by businesses to claim VAT exemption or rebates on assets such as land, property or equipment, which have been purchased with the intention of resale, but have been used by their owner for other purposes. This could be intentional, or due to a genuine change in circumstances.
Effectively, the scheme allows companies to spread the initial VAT claimed on assets over a number of years. If the asset is used solely for business use, you can reclaim all of the VAT. If it’s used for a combination of business and personal use, you can claim back a percentage of the VAT – this is known as a ‘partial exemption’.
5. VAT Retail Schemes
The VAT Retail Schemes can only be used by businesses that make retail sales, and have an annual VAT-exclusive turnover for these sales of less than £130 million. Businesses that make a mixture of retail sales and non-retail sales may also use the schemes, but only on their retail sales (they must account for their non-retail sales in the regular way). There are 3 different standard VAT retail schemes used by different businesses:
- Point of Sale Scheme - for businesses that calculate and record VAT when the sale is made.
- Apportionment Scheme - for companies that are buyers of goods that they resell.
- Direct Calculation Scheme - for businesses that only have a small amount of sales at one particular VAT rate, with most of their sales at a different rate.