Businesses which are VAT registered may opt for VAT cash accounting if your annual sales are below £1,350,000. Under this scheme, you still issue your VAT sale invoice the normal way except you only pay the sales tax to HMRC when you received monies from your customers.
This VAT scheme can give you significant cash flow advantage. If you allow credit terms to your customers, you do not have to account for VAT on sales until you have received the monies. If your customer never pays you, you never have to pay VAT. Similarly, you cannot reclaim VAT on your purchases until you have actually paid your suppliers.
The business must leave the cash accounting scheme when your taxable turnover are more than £1.6 million. There are other VAT schemes available for businesses - Flat Rate Accounting Scheme and Annual Accounting Scheme.
Accounting for VAT under Cash Accounting Scheme is similar to that of the Standard VAT scheme.
If you require bookkeeping services for VAT accounting purposes, you are welcome to contact our accountants at Concise Accountancy will be more than happy to assist you and provide you with the best accounting package.
Concise Accountancy – Making VAT administration simple for business
