Debitoor Dictionary

Accounting terms explained simply

Over 300 Articles for Founders and Entrepreneurs

  1. Cash accounting VAT scheme
  2. Tax accounting
  3. VAT
  4. Flat rate VAT scheme
  5. VAT registration
  6. VAT return

Standard VAT Accounting Scheme – What is the Standard VAT Accounting Scheme?

The Standard VAT Accounting Scheme is a method of reporting VAT whereby VAT is recorded and paid on the basis of when invoices are issued.

For small businesses and freelancers, managing VAT is an important part of running a business. Keep on top of VAT reports with Debitoor invoicing software, free for 7 days.

Under the VAT Standard Accounting Scheme, businesses submit a VAT Return four times per year. Any VAT you owe must be paid quarterly. Similarly, any VAT refunds you are due will also be repaid quarterly.

How much VAT you should pay or be refunded is calculated by comparing the amount of VAT due on your costs and the amount of VAT owed on your sales. If the amount for sales is higher than the amount for costs, you should pay HMRC the difference. If your costs are higher than your sales, HMRC will refund you the difference.

Accrual accounting and the Standard VAT Scheme

The Standard VAT Accounting Scheme follows the principles of accrual accounting – meaning that financial activities are reported as they occur, regardless of when the payment is completed.

Within the Standard VAT Accounting Scheme, a financial activity is considered to occur on the date a VAT invoice is issued. Income is reported when you raise an invoice for a customer and expenses are reported when you recieve an invoice from a supplier.

As such, when filing a VAT Return using this scheme, VAT correlates to the quarter in which an invoice is received or raised, regardless of whether you make or recieve payment in a different quarter.

Alternatives to the Standard VAT Accounting Scheme

If your business has an annual turnover of more than £1,350,000, you must use the Standard VAT Accounting Scheme. However, smaller organisations can choose from several other VAT Accounting Schemes, including:

  • Cash Accounting VAT Scheme: this scheme follows the principles of cash accounting and therefore considers the date payments are made, rather than the date an invoice is issued. This is generally used by smaller businesses which do not make purchases on credit and often receive late payments.
  • Flat Rate VAT Scheme: for business with a turnover under £150,000 (not including VAT), it is possible to pay a fixed rate of VAT to HMRC, then keep any VAT charged to customers.
  • Annual Accounting VAT Scheme: whereas the Standard VAT Accounting Scheme requires businesses to submit VAT returns on a quarterly basis, the Annual Scheme lets businesses make advanced payments towards their VAT bill and submit one VAT Return each year.

VAT in Debitoor

For VAT registered businesses, VAT Returns are an essential part of annual and quarterly accounts. With invoicing software, its easier than ever to submit your VAT returns thanks to automatic VAT reports.

Create invoices with multiple VAT rates, and automatically apply VAT to any of your expenses. Then, generate a VAT report which gives you an up-to-date overview of how much VAT you need to pay.

Find out more about creating a VAT report with Debitoor invoicing software.