Cash accounting Scheme

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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 haven't 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.

Eligibility

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

VVAT taxable turnover is the total of everything sold that isn't VAT exempt.

Exceptions

You can't 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 can't 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 from within the EU
  • moving goods outside a customs warehouse

You must leave the scheme once your turnover goes over 1.6 million.

If you would like further information on the VAT Cash Accounting Scheme, please register with us or send us an email.