You are able to choose 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 opt 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 during the next vat return irrespective of whether your client has cleared payment of your vat invoice This is also true in case your business compels that you issue credit invoices more often than not. In such a case you would find yourself paying of the vat amounts in case your client does not make any payment at all. 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 over 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 only when your estimated taxable sales in the next year aren’t greater than ?1.35 million go to my site. You will also have to exit the scheme as soon as your taxable sales touch ?1.6 million. You could also be able to use the cash accounting scheme with other vat schemes like the annual accounting scheme.

You can shift over 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 your earlier vat invoices that you’d have issued under the standard vat accounting scheme. There are many benefits and drawbacks while opting for the cash accounting scheme. The advantages are that when your clients pay you only after a couple of days, weeks or months then you need to cover vat only after receiving payments from those clients. You can also remain safe in the event any client doesn’t make payments.

The cons to this particular scheme are that you will have to maintain specific payment records of all of your customers including providing additional evidence in the form of bank statements whenever required by hmrc. You will also be able to reclaim vat on any purchases only once you have paid your supplier. In case you decide to shift over to standard vat accounting then you’ll also need to account for all pending vat amounts including any bad debts. Additionally, you will be barred from using vat cash accounting scheme by hmrc in case you end up making mistakes in vat calculations, get convicted in a vat offence or get penalized for vat evasion. When you do leave the scheme you will have to account for all pending vat over the following 6 months.

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

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