You are able to opt for vat cash accounting scheme to delay your vat payments

If you’re a vat registered trader that has to pay vat as soon as you issue a vat invoice then you can go for vat cash accounting scheme to delay your vat payments. Under this scheme you will have to pay vat only after your customers have paid against your vat invoice.

Under regular vat accounting, you will need to pay vat in the next vat return regardless of whether your client has cleared payment of the vat invoice. This is especially true in case your business compels you to issue credit invoices more often than not. When this occurs you would find yourself paying of the vat amounts in case your client fails to make any payment whatsoever. Thus, you would find yourself paying vat even on your bad debts.

If you are a trader in the UK then you could easily shift to the cash accounting scheme in vat that’s made available from HM Revenue and Customs department or hmrc vat department. You will however be eligible for a this scheme http://vatnumbers.com only if your estimated taxable sales in the next year are not more than ?1.35 million. Additionally, you will need to exit the scheme as soon as your taxable sales touch ?1.6 million. You could also have the ability to use the cash accounting scheme along with other vat schemes like the annual accounting scheme.

You can shift to this scheme even without informing the hmrc vat department provided you do so at the beginning of any vat accounting period. You may however need to separate these invoices from the earlier vat invoices that you would have issued under the standard vat accounting scheme. There are several pros and cons while choosing the cash accounting scheme. The pros are that when your clients pay out only after a few days, weeks or months you’ll need to pay vat only after receiving payments from those clients. It’s also possible to remain safe in the event any client fails to make payments.

The cons to this scheme are that you will need to keep specific payment records of most of your customers including providing additional evidence in the form of bank statements whenever required by hmrc. Additionally, you will have the ability to reclaim vat on any purchases only after you have paid your supplier. In case you decide to shift to standard vat accounting then you will also need to account for all pending vat amounts including any bad debts. You will also be barred from using vat cash accounting scheme by hmrc if you happen to find yourself making mistakes in vat calculations, get convicted in a vat offence or get penalized for vat evasion. Once you do leave the scheme you will need to account for all pending vat within the next 6 months.

If you’re a vat registered trader that sells goods or services mainly on credit but buys them against cash bills then the cash accounting scheme might be well suited for you. You could possibly not pay vat on debt and might only have to pay vat whenever your clients pay out. However, you should check with your vat agent and understand all pros and cons about the vat cash accounting scheme before you opt for this type of scheme.