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Why use the VAT Cash Accounting Scheme

Under standard VAT accounting, you pay VAT on your sales regardless of whether your customer has paid you. Under the Cash Accounting Scheme, VAT does not need to be paid over until your customer has paid your invoice.

Your business can enter this scheme provided your estimated VAT taxable turnover for the next VAT year is not more than £1.35 million. You can continue to use the scheme until the VAT taxable turnover exceeds £1.6 million.

Using cash accounting may help your cash flow, especially if your customers are slow payers. If a customer never pays you, you do not have to pay VAT on that bad debt as long as you continue to use the Cash Accounting Scheme.

However, there are downsides to the use of this scheme. For example, you cannot reclaim VAT on your purchases until you have paid your suppliers. This can be a disadvantage if you buy most of your goods and services on credit. The scheme is also not advised if you regularly reclaim more VAT than you pay. You will usually receive your repayment later under cash accounting than under standard VAT accounting unless you pay for everything at the time of purchase.

If you are interested in using the scheme we can help you crunch the numbers to see if this is a viable option for your company.

Source: HM Revenue & Customs Tue, 11 Aug 2020 05:00:00 +0100

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Below are links to websites you may find of interest, but as we like to support our local community and clients, we have included links to websites that may be of interest:

HMRC
FT
BBC
VEALE WASBROUGH VIZARDS
CESP
PRACTICE INDEX
SIMCOMM ACADEMY

More Local:
FOOTPLATE EXPERIENCE
ANGLEBURY PRESS
OFFCAMBER.CO.UK