If you're a vat registered trader that has 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 have to pay vat only after your customers 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.com issue credit invoices more often than not. In such a case you would find yourself paying of the vat amounts even in case your client fails to make any payment at all. Thus, you would find yourself paying vat even on the debt.
If you are a trader in Britain then you may easily shift over to the cash accounting scheme in vat that's made available from HM Revenue and Customs department or hmrc vat department. You will however be eligible for a this scheme 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 once your taxable sales touch ?1.6 million. You could also be able to use the cash accounting scheme along with other vat schemes like the annual accounting scheme.
You can shift over to this scheme even without informing the hmrc vat department provided you are doing so at the beginning of any vat accounting period. You may however have to separate these invoices from the earlier vat invoices that you'd have issued in the standard vat accounting scheme. There are many pros and cons while choosing the cash accounting scheme. The advantages are that when your clients pay out 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 have 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 be able to reclaim vat on any purchases only once you have paid your supplier. Just in case you decide to shift over to standard vat accounting then you'll also need to account for all pending vat amounts including any bad debts. 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. Once you do leave the scheme you will need to take into account all pending vat over the following Six months.
If you're a vat registered trader that sells services or goods mainly on credit but buys them against cash bills then the cash accounting scheme might be well suited for you. You could possibly avoid paying vat on bad debts and may only have to pay vat when your clients pay out. However, you need to check with your vat agent and understand all pros and cons about the vat cash accounting scheme before you opt for this type of scheme.
