VAT registered businesses act as unpaid tax collectors and are required to account both promptly and accurately for all the tax revenue collected by them.
HMRC have introduced a number of VAT schemes over the years designed to reduce the administrative burden on small businesses. One such scheme is the annual accounting scheme.
It is quite possible within the VAT system for a business to be in the position of having to pay over VAT to HMRC while not having received payment from their customer.
Cash accounting enables a business to account for and pay VAT on the basis of cash received and paid rather than on the basis of invoices issued and received.
The flat rate scheme for small businesses was introduced to reduce the administrative burden imposed when operating VAT.
Making Tax Digital for VAT (MTDfV) is being introduced from April 2019. See our factsheet on the new mandatory digital record keeping and digital VAT return requirements.
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