Sigma Accounting:
Sigma Accounting specialises in providing accountancy and business advisory services to owner managed businesses based on the Isle of Man.
For an informal discussion about how we can help you with the accountancy requirements of your business please contact us.
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SIGMA accounting
Sigma Accounting is registered in the Isle of Man (number 023280B)
and is a member of the ICAEW Practice Assurance Scheme.
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What is the Cash Accounting Scheme?
Using standard VAT accounting you:
Using the Cash Accounting Scheme, you:
Who can use the Cash Accounting Scheme
You can use the Cash Accounting Scheme if your estimated VAT taxable turnover during
the next tax year is not more than £1.35 million. Your VAT taxable turnover includes
any standard, reduced and zero-
Once you start to use cash accounting, you can continue to do so until your VAT taxable turnover reaches £1.6 million.
Who cannot use the Cash Accounting Scheme
You cannot use cash accounting if:
When you must not use cash accounting
Even if you use cash accounting, you must still account for VAT using standard VAT accounting when you:
The pros and cons of the Cash Accounting Scheme
Benefits of cash accounting
Using cash accounting may help your cash flow, especially if your customers are slow payers. You do not need to pay VAT until you have received payment from your customers. So if a customer never pays you, you don't have to pay VAT on that bad debt as long as you continue to use the Cash Accounting Scheme.
Disadvantages of cash accounting
Dependant on your own circumstances, there may be some disadvantages to using cash accounting:
Additional record-
Changing to cash accounting doesn't mean you can just keep a record of your cash
position -
In addition to keeping all required VAT records and accounts for standard VAT accounting, you must also use the following procedures for sales and purchases.
Invoices
If you are paid in cash you must, if asked by your customer, endorse the customer's copy of your sales invoice with the amount and date paid.
If you settle an invoice using cash, you must keep a copy of the purchase invoice endorsed with the amount and date paid.
Payment records
Your records must clearly cross-
Joining and leaving the Cash Accounting Scheme
Joining the Cash Accounting Scheme
You do not need to complete an application form or advise Customs & Excise to start using the Cash Accounting Scheme.
You can start using the Cash Accounting Scheme:
If you are already registered for VAT when you start using cash accounting, you must make sure that you do not account for VAT twice on any sales or purchases. You must identify and separate any transactions in your records that you have already accounted for using standard VAT accounting.
Leaving the Cash Accounting Scheme
You may leave the Cash Accounting Scheme voluntarily at the end of any VAT accounting period. You do not need to notify Customs & Excise. You can rejoin at the beginning of any VAT accounting period, provided you meet the criteria at that point in time.
You must leave the scheme if your VAT taxable turnover is over £1.6 million.
Customs & Excise may also withdraw your use of the Cash Accounting Scheme for a number of reasons, including:
Once you have left the scheme you must account for any outstanding VAT. You can either:
But the option of a further six months is not available if:
Using the Cash Accounting Scheme with other schemes
You may be able to use the Cash Accounting Scheme together with some of the following VAT schemes:
Annual Accounting Scheme
Using annual VAT accounting, you make nine monthly or three quarterly interim payments throughout the year. You only need to complete one VAT Return at the end of the year when you either make a balancing payment or receive a balancing refund.
Flat Rate Scheme
You can't use the Cash Accounting Scheme with the Flat Rate Scheme. Instead, the
Flat Rate Scheme contains its own cash-
Retail schemes
If you are a retailer, there are several schemes where you can simplify your calculation of VAT by not having to account for VAT on each individual sale.
Margin schemes for second-
If you buy or sell second-
Tour Operator's Margin Scheme
The Tour Operator's Margin Scheme makes VAT accounting easier for tour operators who buy and sell travel, accommodation and certain other services internationally.
Start up advice |
Bookkeeping |
Accounting |
VAT |
Tax |
Starting your business |
Running your business |
As your business grows |
Sole trader or Limited company |
Choosing and registering your business name |
Business banking |
Deciding on VAT registration |
How an accountant can help your business |
Choosing an accountant |
Keeping records |
Employing staff |
VAT schemes |
Filing statutory documents |
Paying tax |
Changing your accountant |
Cash accounting scheme |
Annual accounting scheme |
Flat rate scheme |
Management accounts |
Budgets and forecasts |
Investment appraisal |