VAT Cash Accounting Scheme (UK)
Under the VAT Cash Accounting Scheme, an eligible business normally accounts for output VAT on receipt of customer payments and claims allowable input VAT when it pays suppliers, rather than using the normal invoice-based timing. This can improve cash flow where customers pay late, but may delay recovery on unpaid purchases. Entry, exit and transaction exceptions must be checked against the applicable period and rules. This VAT scheme is distinct from the cash basis for income-tax trading profits.
Worked example
A business using the scheme issues a taxable invoice in March and receives the customer’s payment in April. Subject to the scheme’s exceptions, it accounts for the output VAT in the period of payment, not merely because the invoice was issued in March.
Common mistake
Reclaiming input VAT on an unpaid supplier invoice under the scheme, or confusing VAT cash accounting with the income-tax cash basis.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | TX (UK) | Direct | June 2026–June 2027 |