VAT cash accounting scheme

Accounting for VAT when money moves rather than when invoices are raised.

What it means

Under cash accounting you pay VAT on sales when the customer pays and reclaim on purchases when you pay the supplier.

Why it matters

It helps cash flow substantially where customers pay slowly, because you are not funding VAT on invoices that have not been paid — and it gives automatic bad debt relief.

What it looks like in practice

There is a turnover ceiling to join and a higher one to leave. It suits businesses with slow-paying customers and hurts those who buy on long credit and sell for cash.

What to watch out for

Switching schemes without modelling it. And forgetting that reclaiming input VAT is also delayed until you pay.

Where to get proper advice

GOV.UK for the current rates and thresholds, which move most years. Your accountant before acting — this is exactly the kind of question a fee is for.