Government urged to extend cash VAT scheme

12 November 2008

More businesses should be allowed to join the VAT Cash Accounting Scheme as a way of protecting cashflow in difficult trading conditions, a leading business group has argued.

The Forum of Private Business (FPB) wants the government to extend the qualifying criteria for joining the CAS.

Currently only those with a turnover of less than £1.35 million can join the scheme. The FPB believes this level should to be raised to £2 million in order to allow more struggling businesses to be eligible.

The Cash Accounting Scheme allows firms to pay VAT on actual payments, rather than unpaid invoices, so boosting cashflow, particularly if payments owed to them are late.

Phil Orford, the FPB’s chief executive, said: “Cash accounting for VAT payments is an established mechanism that delivers immediate liquidity benefits. Eligible businesses pay VAT to the revenue only when they have been paid. The improvement to cash flow could be as much as £10,000. For some business owners, this could be the difference between survival or not.”