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When you join the CAS, you account for VAT on the basis of payments you receive and make, rather than on invoices you issue and receive. The main benefit is that this helps your cash flow, particularly if your customers pay you late, although it also means you cannot reclaim VAT on purchases until you pay your supplier.
Do I qualify for the Scheme?
Businesses with an annual turnover of £1.35 million or less (excluding VAT) qualify as long as they meet certain conditions and can continue to use the scheme until their annual turnover reaches £1.6 million (excluding VAT). Businesses may use the CAS for a further six months to account for any VAT outstanding on supplies made and received while using the scheme. Any VAT still outstanding at the end of the six month period must be accounted for on the VAT return ending then.
How to apply
There is no need to apply to use this scheme, and businesses can change to it at the beginning of any tax period. If your business is already registered for VAT when you start, you must make sure that you do not account for VAT twice on any supplies made or received previously.
The CAS can be used together with the annual accounting scheme. There is also a cash-based version of the flat rate scheme, which can be used as an alternative to cash accounting.
How the FPB can help
Members of the Forum of Private Business (FPB) have unlimited access to our member helpline, with experienced business advisers ready to take your call. If you require more specific information, we will put you in touch with one of our team of twenty professional advisers, including our VAT Adviser, who provide advice free of charge. Call the Helpline on 0845 130 1722 for more information on the Cash Accounting Scheme or any other issue affecting your business.
We are campaigning on this too
Our members have told us that they are increasingly struggling with cash flow problems relating to late payment. We have put forward a proposal to the Chancellor of the Exchequer, Alistair Darling, which will enable more businesses to take advantage of the Cash Accounting Scheme. We want the qualification limit to be increased to businesses with a turnover of £2 million (excluding VAT) so that they too can benefit from immediate cash flow relief.
We want to hear from you if you are struggling to pay your VAT bills
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