Commentary

V7.196 How the cash accounting scheme works

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.196 How the cash accounting scheme works

Part V7 Tax planning | Commentary

V7.196 How the cash accounting scheme works

The main advantage of the cash accounting scheme is that a business has no output tax liability until the date when payment is received from a customer – in other words, no money received means no VAT bill due to HMRC. This is in contrast to the normal VAT accounting rules, where VAT is payable on the date of an invoice or receipt of payment, whichever happens sooner. See Example 1.

Example 1

Anita is a self-employed computer consultant and requires all of her customers to pay sales invoices within 60 days of the date

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