What is VAT Cash Accounting?
VAT Cash Accounting is a scheme which allows your business to account for VAT based on dates of payment and receipt.
Under the standard rate scheme, VAT is accounted for based on the date of the sales or purchase invoice.
Is the scheme suitable for my business?
The scheme is good for businesses which have slow paying customers.
The scheme is not suitable for:
- Businesses who purchase a lot on credit
- Startup businesses, with significant of upfront costs
- Construction businesses, who must follow the Domestic Reverse Charge rules.
What are the advantages of the scheme?
- Helps cashflow management. No need to pay the VAT until your customer pays you.
- Automatic bad debt relief. If you don’t receive payment from your customer, you don’t pay VAT on the invoice.
Is my business eligible for the scheme?
Your business should:
- Be VAT registered.
- Have VAT taxable turnover of no more than £1.35m in the next 12 months
- Be up to date with of VAT return filings
- Be up to date all VAT payments, or have a payment plan in place with HMRC for any outstanding amounts.
How does my business join the scheme?
There is no requirement to notify HMRC when joining or leaving the scheme.
Report using the Cash Accounting scheme at the start of a new VAT period.
How can Wessex help?
We have an in depth knowledge of our clients’ businesses and their financial information and can advise our clients accordingly on the suitability of VAT schemes appropriate to their businesses, maximising any cashflow advantages.
Our collaborative approach and use of Xero enables us to prepare your VAT returns and administer the scheme accurately and efficiently on your behalf.
For further information and to find out if VAT Cash Accounting would be suitable for your Devon or Somerset business please do not hesitate to contact the team at Wessex, or book a review:
