If the business expects that the taxable supplies in the next 12 months will not exceed £1,350,000, they can apply to join the scheme. In order to join the businesses must be up to date with their VAT returns and cannot register as a group of companies. Application to join the scheme must be made on form 600(AA) which can be found on the GOV.UK website or via a link in the VAT Notice 732. HMRC will advise the business in writing if the application is accepted.
The VAT payments
Businesses that have been VAT registered for 12 months or more will pay their VAT in nine monthly instalments. Each instalment will be equal to 10% of the previous year’s liability. These instalments are payable at the end of months 4-12 of the current annual accounting period.
Alternatively, the businesses may choose to pay their VAT in three quarterly instalments of 25% of the previous year’s liability. These are payable at the end of months 4, 7 and 10 of the current annual accounting period.
The balance of VAT liability for the year is then due together with the VAT return two months after the end of the annual accounting period.
Even if your business has been VAT registered for less than 12 months, you may still join the scheme. But each instalment will be based on an estimate of the VAT liability. HMRC will advise on the amount of the instalments to be paid. The annual accounting period will usually begin at the start of the quarter in which the application is made. However, it may begin at the start of the next quarter, if the application is made late in a quarter.
If business has increased or decreased significantly, you will be able to apply to HMRC to change the level of the instalments payable.