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GST annual accounting scheme for small businesses

​​How does the annual accounting scheme work?

Under the annual accounting scheme, you only need to complete one return for each calendar year, due by 31 January the following year. This compares to the standard GST accounting system, under which GST returns and charges are completed every quarter.

Annual accounting scheme advantages

The scheme's advantages are:

  • you only submit one return per year instead of four
  • you only need to make two GST payments per year
  • your customers are more likely to have paid you before you need pay your GST bill

Annual accounting scheme disadvantages

The scheme's disadvantages are:

  • making just two payments of GST per year may strain your business finances at those times
  • you will only get one GST refund per year
  • if your turnover decreases sharply your interim payments might be higher than your GST payments would have been under standard GST accounting.

Can my business use the annual accounting scheme?

You can use annual accounting if your taxable turnover (excluding GST on sales) in the previous 12 months did not exceed £500,000. When calculating this figure, don't include the value of capital asset sales.

If your business is using the annual accounting scheme, you can continue to do so until your taxable turnover for a calendar year exceeds £600,000.

If your business normally receives GST refunds and you join the annual accounting scheme, you will not be required to make an interim payment. But remember: you will only receive refunds once a year.

When can I not use it?

You can't use the annual accounting scheme if:

  • your taxable turnover exceeded £500,000 in the last calendar year
  • you are registered for GST as part of a group registration
  • you were a member, but left the annual accounting scheme in the past 12 months
  • more than 20% of your purchases and expenses are from, or more than 20% of your sales are to, one or more 'connected persons' (usually a relative, 'connected persons' has the same meaning as in Article 3 of the GST law 2007)
  • you are not up to date with your GST returns and payments
  • you are insolvent, en desastre or in administration

Joining the annual accounting scheme

You can apply in writing to join the annual accounting scheme.

Your first GST return period using annual accounting will be shown on the approval letter we send you. This is normally a calendar year.

Can I join the scheme part way through a year?

You can apply to join the scheme part way through a year. Your next quarterly return period will become your first annual accounting period and will run to the year end.

For example:
  • you have already submitted a GST return for the period up to 31 March 2012
  • you apply on 19 April to join the scheme and are approved
  • you will submit a return and pay GST for the period up to 30 June 2012 as normal
  • you will then have to submit a GST return covering 1 July to 31 December 2012
  • you must submit this return and pay any GST you owe by 31 January 2013

Changes to your business that you must tell us about

Once you have joined the annual accounting scheme you must notify us within 30 days if there are significant business changes that may affect your eligibility to remain in the scheme.

For example:

  • you expect your taxable turnover to be more than £600,000 in the coming year (because you buy another business or set up a new branch)
  • you become insolvent, en desastre or enter administration

Completing your annual GST return

Annual returns are completed in exactly the same way as quarterly returns. Your annual return is due by 31 January the following year.

During the year you will make one interim payment, calculated as half of the GST you owed during the previous year. You must pay this by 31 July of the current year.

When you submit your GST return for the previous year, we will subtract the interim payment you made from your annual GST bill.

If you join the scheme after 30 April, no interim payment is due in that year.

If you have been registered for GST for less than 12 months, your interim payment is based on an estimate of the GST we expect to be due from you for the coming year, based on the GST returns you have made.

When you're filling in your GST return, do not adjust box 8 ('amount payable or refundable') by the amount of the interim payment. Enter the total tax due for the year.

Leaving the annual accounting scheme

You may leave the scheme voluntarily at any time by letting us know in writing before the end of that GST return period.

If you ask to leave, your annual GST return period will terminate at the end of that month, and your first quarterly return period will begin on the following day.

Why should I leave?

You must leave the scheme at the end of the GST period if:

  • you sell your business or stop trading
  • your taxable turnover exceeds £600,000 in a calendar year
  • the nature or structure of your business changes so that you expect turnover to exceed £600,000 in the year ahead
  • you are registered for GST as part of a group registration
  • more than 20% of your purchases and expenses are from, or more than 20% of your sales are to, one or more 'connected persons' ('connected persons' is normally a relative and has the same meaning as in Article 3 of the GST law 2007)
  • you are not up to date with your GST returns and payments
  • you are insolvent, en desastre or in administration

If you become insolvent, en desastre or enter administration

If you become insolvent, en desastre or enter administration, you must notify us within 30 days.

Your annual accounting period will end, and normal quarterly returns will start, from the date you become insolvent, en desastre or enter administration.

If you sell your business or you stop trading

If you sell your business or stop trading, you must notify us within 30 days.

Your GST period will come to an end on the day of sale or date you stop trading. A GST return is due for the period from 1 January to the new period end. If you incur GST on business costs after this date you can recover it.

We may remove you from the annual accounting scheme if you:

  • calculate your GST incorrectly on two or more occasions (each case will be treated on its merits)
  • fail to make the interim payment
  • are convicted of a GST offence
  • receive a penalty for GST evasion

Using the annual accounting scheme alongside other GST schemes

You can use any of the following schemes alongside annual accounting:

  • cash accounting scheme
  • retail business scheme
  • margin scheme for the motor trade
  • tour operator margin scheme for the supply of holidays in Jersey

GST cash accounting scheme for small businesses
GST retail scheme
Motor trade GST margin scheme
Tour operator GST margin scheme​

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