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

If you are a vat registered trader that has got to pay vat once you issue a vat invoice then you can certainly opt for vat cash accounting scheme to delay your vat payments. Under this scheme you will need to pay vat only after your clients have paid against your vat invoice.

Under regular vat accounting, you will have to pay vat during the next vat return regardless of whether your client has cleared payment of the vat invoice. This is also true if your business compels that you issue credit invoices most of the time. In such a case you would end up paying the vat amounts in case your client does not make any payment at all. Thus, you’d find yourself paying vat even on your debt accounting.

If you are a trader in the UK then you may easily shift to the cash accounting scheme in vat that’s made available from HM Revenue and Customs department or hmrc vat department. You’ll however qualify for this scheme only when your estimated taxable sales within the next year are not greater than ?1.35 million. Additionally, you will have 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 are doing so at the start of any vat accounting period. You will however need to separate these invoices from the earlier vat invoices that you would have issued under the standard vat accounting scheme. There are many pros and cons while choosing the cash accounting scheme. The advantages are that if your customers pay you only after a few days, weeks or months you’ll 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 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. Additionally, you will have the ability to reclaim vat on any purchases only after you have paid your supplier. Just in case you opt to shift to standard vat accounting then you’ll also have to take into account all pending vat amounts including any money owed. 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. When you do leave the scheme you will have to account for all pending vat over the following 6 months home staging.

If you are 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 suitable for you. You could not pay vat on bad debts and might only need to pay vat when 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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