What is the VAT Accounting Scheme?
VAT Registration
First of all you can’t be in this scheme if you’re not VAT registered. Ask us for advice on VAT registration, but if you make sales of more than £40,000 a year you should think seriously about VAT registration and if you make sales of more than £54,000 in any twelve month period you have to be VAT registered.
VAT registration is fairly straight forward, but has to be done on time, and careful planning can make it quite cost effective. We’ll be happy to help
Cash Accounting
Any VAT registered business can use the cash accounting scheme if its sales are less than £600.000 per annum
Cash Accounting means
- The VAT you have charged to your customers has to be paid to HM Customs and Excise only after you have been paid by your customer.
- The VAT your suppliers have charged to you can only be reclaimed from HM Customs and Excise only after you have paid your supplier.
What this means is you never have to pay tax over before you’ve got the money in. In most cases this would not suit retail business and this is one good reason why this book is not suitable for them.
Once you’re in the scheme you can stay in until your sales exceed £750,000 (we know this is not the same number as £600,000 but the figure for leaving the scheme is not the same as the one for joining it). If you’re approaching that figure you should talk to us about planning how you have to transfer to the VAT scheme for businesses as this will mean you have to change your accounting procedures.
Exceptions to the scheme
Hire purchase, conditional sale and credit sale agreements cannot be dealt with under the scheme. Conditional and credit sales are where the price is payable by instalments in similar fashion to HP agreements. If you make sales in this way ask us for advice.
Imported goods are not covered by the scheme. If you do import, ask us to record these transactions.
The scheme cannot apply to invoices where more than six months credit is given. We wouldn’t usually recommend that you give that much credit!
For further information, please contact us on 03332 401 333 or email enquiries@kirknewsholme.co.uk
