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HMRC internal manual

VAT Cash Accounting Scheme Manual

From
HM Revenue & Customs
Updated
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Cash accounting scheme: Special circumstances: VAT groups

The VAT Act 1994 Section 43(1) requires any supplies made to or by any group member to be treated as supplied to or by the group representative member. Therefore, the turnover limit for cash accounting is applied to the group as a whole. If the turnover of the group as a whole is over £1,350,000, cash accounting cannot be used, even though the turnovers of the individual group members may be below this limit.

It would not be practicable for assurance reasons to have one or more companies within a group operating cash accounting while the other members are operating under the normal invoiced based requirements.

Business using Cash Accounting enters a VAT Group

When a cash accounting business enters the group, the cash accounting business must follow the deregistration procedures referred to in VCAS6550.

Group turnover remains under the scheme limits

If the enlarged group’s turnover remains under the scheme turnover limit plus the 25% tolerance, the new member must use cash accounting from the date of entry to the group. (If the new member makes or receives payments, after joining the group, for sales and purchases made whilst separately registered, the associated VAT will have been accounted for on its final return, and should therefore be excluded from the group’s VAT account).

Group turnover goes over the scheme limits

If admission of the new member pushes the group turnover over the scheme turnover limits, the whole group must leave the scheme at the end of that tax period.

Non-Cash Accounting business enters a VAT Group

When a non-cash-accounting business enters the group, it must follow the deregistration procedures referred to in VCAS6550.

Group turnover remains under the turnover limit

The group must ensure that its enlarged turnover remains under the scheme turnover limit plus the 25% tolerance. If it does, the new member must use cash accounting from the date of entry into the group. If the new member makes or receives payments, after joining the group, for sales and purchases made whilst separately registered, the associated VAT will have been accounted for on its final return and should therefore be excluded from the group’s VAT account.

Group turnover goes over the turnover limit

If the admission of the new member pushes the group turnover over the scheme turnover limit, the whole group must leave the scheme at the end of that tax period.

VAT group not using Cash Accounting

A cash accounting business who enters a VAT group which is not using the scheme must return to normal accounting and account for outstanding VAT whilst using the scheme on its final VAT return.