- This topic has 3 replies, 2 voices, and was last updated 9 years ago by
.
- Posts
Nine monthly payments are made on account, each being 10% of the previous year’s VAT, in months 4 to 12 of the period with any balancing payment being made with the VAT return, or they may choose to pay quarterly instead .
A new business will base its payments on an estimate of the VAT liability for the year.
I did not understand above points on AAS
also I could not solve this problem.
Jump ltd applies to use the annual accounting scheme from 1 jan 2014. the company’s net VAT liability for the y/e 31 dec 2013, was 3600. the actual net VAT liability for the y/e 31 dec 2014, is 3821.
Explain the returns and payments jump ltd must make for the y/e 31 dec 2014.AAS is available for small businesses only, meanwhile the quarterly payment is the generic rule. AAS allows to do VAT calculation once per year and not quarterly as any other businesses. On the other hand the businesses in AAS need to make a monthly – let’s say – “pre-payment” based on their previous year’s VAT liability.
In case of Jump Ltd., 9 monthly payments need to be done. The first payment is due at the end April, the amount is based on the last VAT liability figure – £3,600. So the payable amount is £360 per month until the end of December.
Then they calculate their VAT liability and the difference between what they paid so far and the total figure. They paid 9x£360=£3,240 up to 31/12/2014. The difference is £3,821-£3,240=£581 which is payable after the 2014 VAT return is made.I am confused. is that 9 months amount prepayment? I did not understand why 9 months taken? what about remaining 3 months?
My understanding is, that because these small businesses are allowed to file their VAT return only once per year (instead of quarterly), HMRC try to “predict” their VAT liability based on the previous year and ask a “prepayment” before the actual calculation becomes available.
After 9 monthly payments, the business submits their VAT liability and the difference needs to paid as a balancing payment.
- You must be logged in to reply to this topic.