11. Cash accounting
What cash accounting is and how it is affected by insolvency.
The Cash Accounting Scheme allows VAT-registered businesses to account for VAT, based on payments you make and receive, rather than on tax invoices.
Read the Cash Accounting Scheme (Notice 731) for information about how the scheme operates.
The office holder is responsible for the Cash Accounting Scheme adjustment described in section 11.3.
The office holder responsible for the business may continue to use the scheme in the post relevant period if the insolvent business was eligible to use the scheme pre-insolvency and continues to be eligible to do so. This may be appropriate in cases when trading has continued after the relevant date.
Tax must be accounted for, within 2 months of the relevant date, on all supplies made and received up to the date of the insolvency which has not previously been accounted for.
If the office holder does continue to use the Cash Accounting Scheme they must, from the date of insolvency, separate in the business records any payments the business receives or makes for transactions already accounted for on the pre-insolvency VAT return.