VAT Registration
First of all you can’t be in
this scheme if you’re not VAT registered. Ask us for advice
on VAT registration, but if you make sales of more than £40,000
a year you should think seriously about VAT registration and if
you make sales of more than £54.000 in any twelve month period
you have to be VAT registered.
VAT registration is fairly straight
forward, but has to be done on time, and careful planning can make
it quite cost effective. We’ll be happy to help
Cash Accounting
Any VAT registered business can use
the cash accounting scheme if its sales are less than £600.000
per annum
Cash Accounting means
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The VAT you have charged to your
customers has to be paid to HM Customs and Excise only after
you have been paid by your customer. |
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The VAT your suppliers have charged to you
can only be reclaimed from HM Customs and Excise only after
you have paid your supplier. |
What this means is you never have
to pay tax over before you’ve got the money in. In most cases
this would not suit retail business and this is one good reason
why this book is not suitable for them.
Once you’re in the scheme you
can stay in until your sales exceed £750,000 (we know this
is not the same number as £600,000 but the figure for leaving
the scheme is not the same as the one for joining it). If you’re
approaching that figure you should talk to us about planning how
you have to transfer to the VAT scheme for businesses as this will
mean you have to change your accounting procedures.
Exceptions to the scheme
Hire purchase, conditional sale and
credit sale agreements cannot be dealt with under the scheme. Conditional
and credit sales are where the price is payable by instalments in
similar fashion to HP agreements. If you make sales in this way
ask us for advice.
Imported goods are not covered by
the scheme. If you do import, ask us to record these transactions.
The scheme cannot apply to invoices
where more than six months credit is given. We wouldn’t usually
recommend that you give that much credit!
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