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ACCA Applied Skills · Taxation (UK) · The effect of special schemes

Which business is MOST likely to benefit from the annual accounting scheme rather than the cash accounting scheme?

A business wanting less administration benefits most from annual accounting, because it submits only one VAT return a year while making interim payments. Bad debt protection suits cash accounting, and a fixed turnover percentage is the flat rate scheme.

  1. AA business wanting to reduce administration by filing one VAT return a year while making monthly or interim paymentsCorrect
  2. BA business whose customers often fail to pay and wants automatic bad debt relief
  3. CA business wanting to pay VAT only on cash received from customers
  4. DA business wanting to use a fixed percentage of turnover instead of calculating input VAT

Explanation

The annual accounting scheme gives one return per year with interim payments, reducing administration. Bad debt protection and paying on cash received are features of cash accounting, while the fixed percentage is the flat rate scheme.

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