Under the standard value added tax (VAT) scheme, as a usual process, the business repays the VAT charged on all the invoices to HMRC every quarter. However, due to delayed payments from clients or if a client defaults, the business cash flow management can suffer. This situation can only be made worse if the business has to repay the VAT amount of each invoice to HMRC in advance. For many businesses, VAT Cash Accounting Scheme can solve any cash flow concerns, as the business only account for VAT once the payment for an invoices have been made. Prominently, it should be noted that the business can use the Cash Accounting Scheme alongside the Flat Rate VAT scheme.
The advantages of the VAT cash accounting scheme are as follows:
Disadvantages include:
Any business can join this scheme and is applicable for businesses that believe its taxable turnover in the next 12 months will not exceed £1,650,000 provided that it:
All standard and zero-rated supplies are included in the £1,350,000 except predictable sales of capital assets that were formerly used within the business; exempt supplies are excluded from this. When a business joins this scheme, it must be careful not to account for VAT again (VAT already charged previously on the basis of invoice given to the customer and received). A business can start using the scheme without informing HMRC. It does not cover:
Once annual turnover exceeds or equals £1,600,000 the business must exit this scheme immediately. When the business leaves the scheme, VAT is payable on all supplies on which VAT has not already been accounted for. However, outstanding VAT can be accounted for on a cash basis for a further six months after leaving the scheme.
Cash book / Bank Statements will be a prime record under the cash accounting scheme. The cash book will summarise all payments made and received with a separate column for VAT. The payments need to be reckoned clearly to the appropriate purchase or sales invoice. In addition, the normal requirements regarding copies of VAT invoices and evidence of input tax apply.
Every business has different needs and a varied approach towards taxation. Some prefer the use the VAT flat rate scheme while other might find VAT cash accounting scheme beneficial. In case businesses have any concerns regarding which scheme is beneficial for them, without hesitation, they can contact DNS Accountants. Our team includes well-read taxation professionals and Chartered Accountants and we are one of the leaders in accounting and taxation in the UK. Our team members have years’ of experience in dealing with VAT related queries and helping clients adopt the best scheme for their business. If a business has missed filing their VAT returns or is unclear about how to file a VAT return, please get in touch with us at www.dnsassociates.co.uk. We focus on delivering exceptional customer service, and believe in offering unmatched client service. DNS Accountants offers services at a nominal rate and helps clients with VAT returns, tax planning, and other accounting services.
Our firms' technology-driven, professional taxation and accounting services take the burden of running a business away from the business owners. On a daily basis, our team helps clients with: bookkeeping, business tax, VAT, and year end accounts for businesses from various industrial sectors. DNS offers company formation, Construction Industry Scheme (CIS), pension auto enrolment, payroll and IPSE membership. Our additional services include supporting clients with business bank account based, company formation services including bank account opening, preparing business plans along with others
Any questions? Schedule a call with one of our experts.
Sumit Agarwal Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.
Invalid value
You are responsible for submitting your tax return to HMRC once a
You may have considered purchasing property through your business if
Whether you prefer to meet and speak over the internet, or if you prefer an in person conversation we can help you with your preference.
Stay up-to-date with the latest news affecting small businesses, get business tips and tax saving advice.
From starting a limited company to tax efficiency tips, we've a range of business guides for you to download and keep.
Our experts will work with you to reduce your corporation, personal or any other tax liability, all within the rules of the UK tax legislations. We’ll ensure you’re claiming all allowances and expense claims that you would be elegible for.
We give free software to all of our clients. You’ll be able to raise sales invoices, snap pictures of receipts and be MTD compliant with ease. You can even manage your business anywhere there’s an internet connection, thanks to our mobile app!
Successful business owners are those that are on top of their numbers. Businesses are driven by the numbers behind them. If you’re not reviewing your profit & loss or balance sheet regularly, how would you know how your business has performed and how would you make proper business decisions? We can help you make sense of your numbers.
Limited time only!
Say Goodbye to Bookkeeping Hassles: Nomi offers Free Receipt Processing and big savings!