Any business can leave the scheme voluntarily at any time by writing to HMRC. However, once its annual taxable turnover exceeds £1,600,000, a business can no longer be in the annual scheme.
- A reduction from four to one in the number of VAT returns needed each year.
- Cash flow can be managed more easily, as the liability to be paid each month is known and certain.
- There is an extra three weeks to complete the VAT return and pay any outstanding VAT.
- It should help to simplify calculations where the business uses a retail scheme or is partially exempt.
It is possible for interim payments to be higher than needed, because they are based on the previous year. However, they can be adjusted if the difference is significant. A business is obliged to notify HMRC if the VAT liability is likely to be significantly higher or lower than in the previous year.