Implications of Cash Accounting for VAT

VAT done based on cash accounting offers benefits to small businesses, However, this will only be momentarily. When your turnover reaches the limit you’ll have to leave the scheme.

The cash accounting scheme is a simple way for businesses to improve their cash flow. It allows you to defer accounting for VAT until the quarter in which you actually received cash instead of when you invoice them. But one disadvantage is that you can’t reclaim VAT on purchases until you pay for them.

To join the scheme you need to evaluate the following. If your turnover in the previous twelve months was less than £1,350,000 you can sign up for the CAS and remain in it until it exceeds £1,600,000. You can choose to leave the scheme at any time the rules say you are required to leave it if your taxable sales in the previous four VAT quarters exceeded £1,600,000.

If you in any doubt, it is always better to get in touch with an accountant, as inspections for VAT malpractices have been intensified by HMRC. KVS Accountants provide tax advice on VAT, corporation tax and personal tax returns. Contact KVS Accountants on 020 7731 6131 for advice. KVS acts as tax advisors in Earlsfield, Fulham, East Sheen, Kensington, Holland Park, Knightsbridge, Shepherds Bush and Putney


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