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COVID-19 - VAT Tips - Think Smart - Cash Accounting

May 2020

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Cash Accounting Scheme

Businesses with a projected taxable turnover of less than £1,350,000 are able to avail themselves of these more cash-flow appropriate accounting rules...

The Cash Accounting Scheme allows businesses to defer payment of tax on sales until the VAT period in which payments are received.

Eligibility to operate the Cash Accounting Scheme is met if a business's anticipated taxable income in the next year is less than £1.35 M.

Note that the threshold refers to taxable income and as such you can exclude any exempt or outside the scope receipts.

Consequently, if for any reason, turnover forecasts are down a business may legitimately join the Cash Accounting Scheme. 

Formal application to use the scheme is not required.  Eligible businesses simply begin doing so from the start of a VAT accounting period.

Businesses must leave the scheme once taxable turnover breaches £1.6 M.

Whilst the scheme offers a real opportunity to defer output tax due until payments are received it should be noted that input tax is not deductible under the scheme until payment has been made.

If you think the Cash Accounting Scheme may be right for your business why not give us a call to discuss.

 

 

Please contact us for further information

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