You can opt for vat cash accounting scheme to delay your vat payments
If you’re a vat registered trader that has got to pay vat once you issue a vat invoice then you can certainly go for vat cash accounting scheme to delay your vat payments. Under this scheme you will only have 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 your vat invoice. This is also true in case your business compels that you vatnumbersearch issue credit invoices most of the time. When this occurs you would find yourself paying of the vat amounts even in case your client does not make any payment whatsoever. Thus, you would find yourself 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 is made available from HM Revenue and Customs department or hmrc vat department. You will however qualify for this scheme only if your estimated taxable sales within the next year aren’t more than ?1.35 million. Additionally, you will have to exit the scheme once your taxable sales touch ?1.6 million. You might also be able to use the cash accounting scheme with other vat schemes such as the annual accounting scheme.
You can shift over to this scheme even without informing the hmrc vat department provided you do so at the start of any vat accounting period. You may however have to separate these invoices from your earlier vat invoices that you would have issued in the standard vat accounting scheme. There are several pros and cons while opting for the cash accounting scheme. The pros 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 case any client doesn’t make payments.
The cons to this particular scheme are that you will have to maintain specific payment records of most 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 to standard vat accounting then you will 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 in case you 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 need to take into account all pending vat over the following 6 months.
If you are a vat registered trader that sells goods or services mainly on credit but buys them against cash bills then this cash accounting scheme might be suitable for you. You could not pay vat on bad debts and might only need to pay vat whenever your clients pay out. However, you should check with your vat agent and understand all advantages and disadvantages about the vat cash accounting scheme before you go for such a scheme.