Simpler VAT for more small businesses

More VAT-registered businesses will be able to use the easier “Cash Accounting Scheme” (CAS) from this month, following changes made by HM Revenue & Customs.

The Scheme allows businesses with turnover of less than £1.35 million to defer paying their quarterly VAT until they have received payment from their customers. Most small businesses should be on it – otherwise you have to pay HMRC VAT based on what you have invoiced even if you haven’t yet got the money. CAS also means bad debts are automatically taken care of from a tax point of view, without you having to apply for a refund.

HMRC has two other VAT simplification schemes that can be useful to small businesses. The Annual Accounting Scheme allows you to pay VAT in monthly or quarterly instalments. And the Flat Rate Scheme lets you apply a flat percentage rate to you annual turnover.  

More information on the VAT schemes available at the HMRC site.

Note that VAT registration is only compulsory if your turnover exceeds a certain threshold – currently around £61,000. See Should I be registered for VAT? on the HMRC site.

HMRC’s National Advice phone helpline is on 0845 010 9000.