Usually, the amount of VAT you pay HM Revenue and Customs ( HMRC ) is the difference between your sales invoices and purchase invoices. You have to report these figures and pay any money to HMRC even if the invoices have not been paid. With the Cash Accounting Scheme you: pay VAT on your sales when your customers pay you reclaim VAT on your purchases when you have paid your supplier To join the scheme your VAT taxable turnover must be £1.35 million or less. Talk to an accountant or tax adviser if you want advice on whether the Cash Accounting Scheme is right for you.

You can use cash accounting if: your business is registered for VAT your estimated VAT taxable turnover is £1.35 million or less in the next 12 months VAT taxable turnover is the total of everything sold that is not VAT exempt. Exceptions You cannot use cash accounting if: you use the VAT Flat Rate Scheme - instead, the Flat Rate Scheme has its own cash-based turnover method you’re not up to date with your VAT Returns or payments you’ve committed a VAT offence in the last 12 months, for example VAT evasion You cannot use it for the following transactions (you have to use standard VAT accounting instead): where the payment terms of a VAT invoice are 6 months or more where a VAT invoice is raised in advance buying or selling goods using lease purchase, hire purchase, conditional sale or credit sale importing goods into Northern Ireland from the EU moving goods outside a customs warehouse You must leave the scheme if your VAT taxable turnover is more than £1.6 million

Join or leave the scheme

How to join You must be eligible to join the scheme. You join at the beginning of a VAT accounting period. You do not have to tell HM Revenue and Customs ( HMRC ) you use cash accounting. How to leave You can leave the scheme at any time, but you must leave if you’re no longer eligible to use it. You should leave at the end of a VAT accounting period. You do not have to tell HMRC you’ve stopped using it, but you must report and pay HMRC any outstanding VAT (whether your customers have paid you or not). You can report and pay the outstanding VAT over 6 months. If your VAT taxable turnover exceeded £1.35 million in the last 3 months you must report and pay straight away. You must pay immediately if HMRC has written to you to withdraw your use of the scheme.

VAT Cash Accounting Scheme

Overview

Usually, the amount of VAT you pay HM Revenue and Customs (HMRC) is the difference between your sales invoices and purchase invoices. You have to report these figures and pay any money to HMRC even if the invoices have not been paid.

With the Cash Accounting Scheme you:

pay VAT on your sales when your customers pay you
reclaim VAT on your purchases when you have paid your supplier

To join the scheme your VAT taxable turnover must be £1.35 million or less.

Talk to an accountant or tax adviser if you want advice on whether the Cash Accounting Scheme is right for you.

View a printable version of the whole guide

VAT Cash Accounting Scheme

Overview

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VAT Cash Accounting Scheme

Overview

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