Cash Accounting Scheme For VAT

Cash Accounting Scheme generally, VAT is payable on sales irrespective of the customer has paid and can lead to a claim for Bad Debt Relief. There VAT schemes available as below:

• Flat rate scheme
• Annual accounting VAT scheme
• Cash accounting scheme

In this article we will explain some salient features of the Cash Accounting Scheme as follows:

Under the Cash Accounting Scheme, VAT does not need to be paid over until the customer has paid. With cash accounting, you account for VAT when you’re paid as opposed to the date you invoice a customer.

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A business can enter this scheme provided their estimated VAT taxable turnover for the next VAT year is not more than £1.35 million in the next 12 months. The business can continue to use the scheme until their VAT taxable turnover exceeds £1.6 million.

Businesses can’t use the Flat Rate Scheme together with the (CAS). However, the Flat Rate Scheme has its own cash based method for calculating turnover. Businesses are also ineligible to use the scheme if they are behind with their VAT payments, late filing returns or have committed a VAT offence in the last 12 months.

Businesses do not need to complete an application form or advise HMRC to start using the (CAS). They can commence using the Cash Accounting Scheme at the beginning of any VAT period or if they are not already registered for VAT from the day their VAT registration starts.

Businesses can leave the (CAS) voluntarily at the end of any VAT accounting period. They do not need to notify HMRC. They can then re-join the scheme at the beginning of any VAT accounting period, provided they continue to meet the necessary criteria.

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