Almost 60,000 more businesses now eligible for simpler VAT

More businesses across the UK can, from this month, benefit from easier ways to deal with VAT, following changes to one of the schemes aimed at helping small and medium-sized firms to better manage their cashflow.

Changes to the Cash Accounting Scheme (CAS) mean an extra 56,500 businesses can now benefit from the scheme, bringing the total number of businesses UK-wide to more than 810,000. This means 44% of VAT-registered firms can now enjoy simpler VAT.

Businesses are eligible for the scheme depending on the size of their turnover. Changes which come into effect this month mean the turnover threshold for eligibility for CAS has increased from £660,000 to £1.35 million.

The Scheme allows businesses with turnover of less than £1.35 million to defer paying their quarterly VAT, until they have received payment from their customers. Normally, firms must pay their quarterly return based on invoices issued and received - as opposed to money received and paid out.

"We recognise a quarterly VAT bill can sometimes cause a cashflow problem for some businesses, especially if their customers are a little tardy at coughing up," says John Brandwood, Senior Policy Manager, Corporation Tax & VAT at HM Revenue & Customs. "Plus the CAS also means businesses can get relief on the VAT element of any bad debts, without having to apply."

Two other VAT simplification schemes are also available: the Annual Accounting Scheme - enabling small businesses to pay their VAT in monthly or quarterly instalments - and the Flat Rate Scheme, which allows businesses to apply a flat rate percentage to their annual turnover.

"VAT simplification schemes allow businesses various options to manage their cashflow better, and employ simpler record-keeping. By putting businesses in control of their own affairs, the aim is to enable them to decide what's best for them."