Even though you don’t need to formally let HMRC know that you are using the VAT Cash Accounting Scheme, there are still rules that you need to follow once you have chosen to adopt it. Here are some do’s and don’ts when using the VAT cash accounting scheme:
Do’s of the VAT Cash Accounting Schemes
- Keep VAT records to support every VAT return showing your payments and receipts;
- Keep your cash expense claims up to date (along with VAT receipts);
- Consider using a cloud accounting software like Quickbooks to manage your VAT as this automatically picks ups your payments and receipts for VAT purposes, which maintaining your business accounts on an accruals basis.
Don’ts of the VAT Cash Accounting Schemes
- Switch between the cash accounting standard VAT scheme each quarter, pick one and stick to it;
- Extend your customer payment terms to over 6 months to try and bypass the rules, you’ll need to pay VAT over to HMRC on these invoices.
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