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(This note is not part of the Regulations)
These Regulations delete Part VII (Annual Accounting) (Regulations 49 to 55) of the Value Added Tax Regulations 1995 (“the principal Regulations”), and substitute a new Part VII.
The Regulations, in accordance with regulation 1, come into force on the 1st April 1996 except where a taxable person is already authorised to use the annual accounting scheme (“the scheme”), in which case the regulations come into force on the first day of his next current accounting year.
The major change that is made to the operation of the scheme is the reduction in the number of interim payments that are required to be made by certain businesses which are authorised to use the scheme. Businesses will also be permitted to join the scheme before the start of their first current accounting year.
Regulation 3 substitutes a new Part VII of the principal Regulations which deal with the requirements of the annual accounting scheme.
New regulation 50 provides that, subject to the turnover limits specified in the regulation a business may account annually whilst making payments of tax quarterly or monthly. The quarterly and monthly sum are defined in regulation 49 and are respectively 20 per cent and 10 per cent of the total VAT liability of the business in the preceding 12 months. The Commissioners and authorised person, however, may agree a quarterly or monthly sum to be paid based on the person’s estimated liability for his current accounting year. Where the quarterly payment is £400 or less, a business is not required to account for and pay tax until the end of its current accounting year.
New regulation 51 makes provision for a transitional accounting period to operate prior to the start of a business’s current accounting year. This means a business will be able to benefit from the scheme as soon as it is authorised.
New regulation 52 states who is eligible to join the scheme. The significant change here is that a taxable person will only be excluded from admission to the scheme for twelve months, instead of three years, if he has previously ceased to operate the scheme.
New regulations 53 and 54 make provision for when a person will cease to be authorised under the scheme, and when authorisation may be terminated.
New regulation 55 specifies the date from which authorisation ceases and sets out how the business is to account for and pay VAT thereafter.
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