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

If you are a vat registered trader that has to pay vat once 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 your vat invoice. This is also true if your business compels you to issue credit invoices more often than not. In such a case you would end up paying the vat amounts even in case your client fails to make any payment at all. Thus, you would end up paying vat even on your bad debts.

If you’re a trader in Britain then you could easily shift over to the cash accounting scheme in vat that’s offered by HM Revenue and Customs department or hmrc vat department. You will however qualify for this scheme www.vatnumbers.com 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 might also have the ability to make use of the cash accounting scheme with other vat schemes such as 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 will however need to separate these invoices from your earlier vat invoices that you’d have issued in the standard vat accounting scheme. There are several benefits and drawbacks while opting for the cash accounting scheme. The advantages are that if your clients pay you 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 case any client doesn’t make payments.

The cons to this particular scheme are that you will need to keep specific payment records of all your clients 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 once you have paid your supplier. In case you decide to shift over to standard vat accounting then you’ll also need to take into account 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. When you do leave the scheme then you will need to take into account all pending vat over the following Six months.

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 could be suitable for you. You could avoid paying vat on debt and may only need to pay vat when your clients pay out. However, you need to seek advice from your vat agent and understand all advantages and disadvantages about the vat cash accounting scheme before you decide to go for such a scheme.