If a company joins a cash accounting scheme what difference will it make to its tax point for vat purposes?

Tax point will change from date of invoice to date of payment.

There are conditions attached to joining the scheme such as turnover limit (拢1.25 million approx) and you must mark both sales and purchase invoices with a date of payment.

Most people use a cash book to keep an eye on the cash flow and to assist with completing the Vat return.

When you fill in the Vat return it will simply be made up of sales invoice paid in the period, and purchases paid in the period.

This can help if you have large sales and unreliable payers, meaning you might normally be parting with lots of Vat on sales before getting the money from the customer.

However, if you have large purchases with Vat and you don't pay straight away, then you will find you can't claim the Vat until you have paid the bill.

If you do zero rated sales such as exports or certain building work, or sell books or childrens clothing, then you could be slighly worse of from a cash flow point of view.

Cash accounting does not take into account accruals or prepayments, it records its transactions when cash actually changes hands so to speak.

Any transactions based on credit acounts (sales & purchases) would have no meaning until the day they were paid for. Hence your tax point is deferred until then - hope this makes sense to you!!

The tax point will be when the cash is received or paid.

The difference will be that VAT won't be paid on debtors, nor reclaimed on creditors at the end of the quarter.
If you have long date debts it's advantageous.
A growing business will be better off, a business in recession will be worse off.

The best example is if you dont recieve payment for 4 - 6 weeks you dont have to account for the vat until your receive the payment instead of when the goods or services have been supplied or when the invoice is issued. If your not on cashaccounting then you may have to pay VAT that you have not yet received if your quarter ends before the payment is made by the customer.