Here is an interesting recent question:
Q: I am about to complete my VAT return for the quarter ended 31 March, and I fear that my turnover has crept to over £1.35m- which is the threshold for cash accounting for VAT. Despite best efforts, my customers are taking longer and longer to pay, so the VAT on my debtors is about £40k on average.
If I have to pay the VAT liability on an accruals basis, the bank account would exceed its overdraft limit and I’ve only just had a review so I don’t think we’d get an extension. Is there anything we can do?
A: When you leave the cash accounting scheme, you may choose either to:
- account for all your outstanding VAT due in the period in which you stop using the scheme. This may be simpler but could have a serious effect on your cash flow if the amounts of the VAT on your debtors is high
- or opt for a further six months in which to account for the outstanding VAT.
Please note that you cannot opt for a further six months in which to account for the outstanding VAT if:
- HMRC has withdrawn use of the scheme from you, or
- the value of your taxable supplies has exceeded £1,600,000 and the value of your supplies made in the previous three months totalled more than £1,350,000