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Many small firms can get a cashflow benefit by using the cashaccounting
scheme for VAT. This means that firms pay VAT on the basis
of payments received from customers (rather than on tax invoices
issued); accordingly, if a business does not get paid, then it does not
have to pay the VAT.
Conversely, VAT cannot be reclaimed on purchases
or input tax, until suppliers have been paid. The Budget increased the
annual taxable turnover figure to be eligible to use the cash-accounting
scheme from £600,000 to £1.35m; that is a significant increase, but
one that did not receive much publicity. Accordingly, smaller firms should
be considering whether they are eligible for cash-accounting treatment.
[2007] LSG 22 March 37.
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April 2007 |
