Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Debt Management and Banking Manual

HM Revenue & Customs
, see all updates

VAT: Annual accounting scheme: Introduction

Overview of scheme

The annual accounting scheme allows customers to account for VAT by making payments bydirect debit, standing order or other electronic means in

  • 9 equal monthly instalments or
  • 3 quarterly instalments.

Determining the payments

The interim payments are determined by

  • the business’ estimated turnover or
  • the net VAT liability in the previous 12 months.

The annual return and reconciliation

At the end of the year, an annual VAT return is sent in with any balance outstanding.


If more money has been paid than the amount outstanding on the return, the overpaymentwill be repaid to the customer if there are no other liabilities outstanding.


If the annual return shows an outstanding balance, the customer should enclose paymentwith the return. If payment is not made, normal recovery rules apply.