What is Cash Accounting Scheme for VAT?

The standard accrual VAT scheme calculates VAT on the basis of the dates Invoices were sent and Bills received.

Under Cash VAT, the calculation is done on the basis of the date when Invoices and Bills were paid. Ultimately there is no difference to the VAT liability but there can be a benefit to cash flow.

For businesses who make sales on credit it means that they are only paying HMRC once their customers have paid them. However if a business takes cash sales and purchases on credit they are likely to benefit from staying on the standard scheme.

The scheme is available for businesses with turnover under £1.35million.

For more information: https://www.gov.uk/vat-cash-accounting-scheme