VAT cash accounting scheme
It is now easier to get your head around ‘VAT and the Cash Accounting Scheme’ as HMRC have updated Notice 731 to replace the previous version published in August 2008.
The notice now reflects new accounting rules for cheques, credit card payments and payments collected by third parties. The notice has also been rewritten in a new format designed to better explain the rules of the scheme.
The cash accounting scheme enables businesses to account for VAT on the basis of payments received and made rather than the normal rules which are based on tax invoices issued and received.
The VAT payable or repayable for each accounting period will be the difference between the total amount of VAT included in payments received and the total amount of VAT included in payments made to suppliers.
The scheme is open to qualifying VAT registered businesses whose taxable turnover is not expected to exceed £1,350,000 in the next twelve months.