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

If you’re a vat registered trader that has got to pay vat as soon as you issue a vat invoice then you can 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 need to pay vat during the next vat return irrespective of whether your client has cleared payment of your vat invoice https://vatvalidation.com. This is also true if your business compels you to issue credit invoices more often than not. When this occurs you would find yourself paying the vat amounts even in case your client does not make any payment at all. Thus, you’d end up paying vat even on your debt.

If you’re a trader in Britain then you may easily shift to the cash accounting scheme in vat that is made available from HM Revenue and Customs department or hmrc vat department. You will however be eligible for a this scheme only if your estimated taxable sales in the next year are not greater than ?1.35 million our website. Additionally, you will have to exit the scheme once your taxable sales touch ?1.6 million. You could also be able to use the cash accounting scheme with other vat schemes such as the annual accounting scheme.

It is possible to shift over to this scheme even without informing the hmrc vat department provided you are doing so at the start of any vat accounting period. You may however need to separate these invoices from your earlier vat invoices that you would have issued in the standard vat accounting scheme. There are many pros and cons while choosing the cash accounting scheme. The advantages are that if your clients pay you only after a couple of days, weeks or months you’ll 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 need to keep 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 over to standard vat accounting then you’ll also need to take into account all pending vat amounts including any money owed. Additionally, you will be barred from using vat cash accounting scheme by hmrc in case you end up 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 within the next 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 not pay vat on debt and may only have to pay vat when your clients pay out. However, you should seek advice from your vat agent and understand all pros and cons regarding the vat cash accounting scheme before you go for this type of scheme.