VCAS1100 - Cash accounting scheme: Introduction: Background

Cash accounting is an optional scheme of accounting for VAT and was introduced on 1 October 1987. Its introduction was a deregulatory measure intended to ease the burdens on small businesses, especially those that provide extended credit to their customers. Since its introduction the scheme has undergone a variety of changes, some to simplify the scheme and others to counter abuse.

The scheme allows businesses to account for VAT on the basis of payments made and received rather than invoices issued and received and it gives automatic bad debt relief.

The scheme is an accounting scheme and, in general, does not override the basic VAT rules on supply, consideration and liability.

The VAT Soft Drinks Industry Levy policy team is responsible for VAT Cash Accounting Scheme policy. If you are seeking policy advice on a particular case that is not covered by this guidance or contained in VAT Notice 731, you should submit either a General Advice Request or a Technical Advice Request. Please see VPOLADV for more information