The VAT Cash Accounting Scheme

Under standard VAT accounting, you owe HMRC the VAT on a sale as soon as you issue the invoice — even if the customer pays 60 days later. Under cash accounting, the clock runs on payment: you account for output VAT when you’re paid, and reclaim input VAT when you pay your suppliers. For a business waiting on slow-paying customers, that timing shift is real money.

• Join: expected VAT-taxable turnover of £1.35 million or less over the next 12 months
• Leave: once turnover exceeds £1.6 million
• Requirement: your VAT returns and payments must be up to date

• Better cash flow — you never fund HMRC’s VAT before your customer has paid you
• Automatic bad-debt relief — if a customer never pays, you never owe the VAT
• Simplicity — VAT follows your bank account, which is easy to track

• You’re usually in a VAT repayment position — cash accounting delays your reclaims
• You buy heavily on credit but get paid quickly — the timing works against you
• You’re paid instantly (retail) — there’s no timing gap to benefit from

Compare with the Flat Rate Scheme →

Cash accounting, standard, flat rate, annual accounting — the best VAT scheme depends on how and when money moves through your business. We compare them for your figures and set up whichever wins. Call 0114 327 1480.

Our VAT returns service →