Joining or leaving the VAT Cash Accounting Scheme

Posted on 29th January 2024 by Streets Value Added Tax


Image to represent Joining or leaving the VAT Cash Accounting Scheme

The VAT Cash Accounting Scheme can offer useful benefits to small businesses. Under standard VAT accounting, VAT is payable on sales whether or not the customer has paid and can lead to claims for Bad Debt Relief. By using the VAT Cash Accounting Scheme no VAT needs to be paid over to HMRC until the customer has paid for his goods / services. Using the scheme, if the customer does not pay, then the VAT is not payable to HMRC.

The scheme can also have cash flow benefits for any business that sells on credit as they only pay VAT on their sales when the customer pays. If you have cashflow concerns, this scheme could be worth a closer look.

By using the scheme, you can only recover the VAT paid on purchases once you have paid your suppliers.

A business can use the VAT Cash Accounting Scheme provided the estimated VAT taxable turnover for the next VAT year is not more than £1.35 million. There is no requirement to notify HMRC, but you must join the scheme from the beginning of a VAT accounting period.

A business can continue to use the scheme until their VAT taxable turnover exceeds £1.6 million. Businesses that stop using the scheme are also not required to notify HMRC. However, they must pay any outstanding VAT whether their customers have paid or not. Any outstanding VAT can be reported and paid over 6 months.


No Advice

The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.

Information

The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.


Expert insight and news straight
to your inbox

Related Articles


VAT reverse charge for builders

There are special VAT reverse charge rules for certain building contractors and sub-contractors. The rules, which came into effect on 1 March 2021, makes the supply of most construction services between construction or building businesses subject to


Check a VAT number

The check a UK VAT number service is available at: www.gov.uk/check-uk-vat-number. This service allows users to check: if a UK VAT registration number is valid; and the name and address of the registered business. The service also allows UK


VAT boost to charitable donations

The government is looking to introduce a new relief that would provide a VAT boost to charitable donations. The new VAT relief would be designed to encourage businesses to donate everyday items to charities without creating a VAT liability. A 12-week


You might also be interested in...