The 2012 worldwide VAT, GST and sales tax guide

688 U NITED KINGDOM
businesses that newly apply to register for VAT (regardless of
their level of annual turnover). For VAT periods beginning on or
after 1 April 2012, all remaining U.K. VAT-registered businesses
(businesses that registered for VAT before 1 April 2010 with VATexclusive
annual turnover below £100,000) will also be required
to file their VAT returns online (using the U.K. VAT authorities’
electronic VAT service) and pay any VAT due electronically.
Payments on account. Taxable persons that have annual VAT liability
of greater than £2,300,000 must make payments on account,
which are interim payments made at the end of the second and
third months of each VAT quarter. The VAT return is due at the
normal time together with a balancing payment for the period. The
level of the payments on account is generally calculated as ½4 of
the taxable person’s VAT liability for the preceding 12 months.
Electronic transfers must be used for all payments on account.
Cash accounting. Businesses with annual taxable turnover of less
than £1,350,000 may apply to use cash accounting. Under the
cash-accounting scheme, businesses account for output tax and
reclaim input tax on the basis of payments received and made
instead of on the basis of invoices issued and received.
Annual accounting. Businesses with annual taxable turnover of
less than £1,350,000 may apply to complete an annual VAT
return. Businesses that use annual accounting must make either
three quarterly or nine monthly interim VAT payments. Any balancing
payment must be made with the annual return. The
annual return is due on the last day of the second month following
the end of the taxable person’s annual VAT accounting period.
Special accounting. A special accounting scheme (known as the
Flat Rate Scheme) exists for small businesses with VAT-exclusive
annual taxable turnover of up to £150,000. Under the scheme,
eligible businesses calculate the amount of VAT due based on a
fixed percentage of their total (VAT-inclusive) turnover. The percentages
range from 4% to 14.5%, depending on the trade sector
of the business.
Other special accounting schemes exist for retailers, businesses
trading in second-hand goods, tour operators, gold traders and
farmers.
Reverse-charge accounting for domestic supplies of mobile phones
and computer chips. The U.K. government has suffered heavy
losses of VAT arising from “missing trader” VAT fraud. This
fraud arises when small, high-value goods are moved around the
EU VAT system and a fraudulent party absconds without paying
the VAT due. An antiavoidance measure requires purchasers of
certain designated goods (broadly, mobile phones and computer
chips) to account for the VAT due under a domestic reversecharge
accounting procedure, rather than paying the VAT to the
supplier. Additional notification and reporting requirements also
apply to these transactions.
Reverse-charge accounting for domestic supplies of emissions
allowances. Purchasers of specified emissions allowances must
account for VAT under a domestic reverse-charge accounting procedure,
rather than paying VAT to the supplier. No additional
notification or reporting requirements apply to these transactions.