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HMRC internal manual

VAT Cash Accounting Scheme Manual

HM Revenue & Customs
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Cash accounting scheme: Manipulation of the scheme: Withdrawal for the protection of the revenue

Regulation 64(1)(d) allows the withdrawal of the scheme for the protection of the revenue. This states that

64(1) A person shall not be entitled to continue to operate the scheme where -

(d) the Commissioners consider it necessary for the protection of the revenue that he shall not be so entitled.

Any decision to exercise the power to withdraw cash accounting for the protection of the revenue under Regulation 64(1)(d) is an operational one to be taken by the local office. Cases of difficulty should be discussed with the appropriate Senior Officer. In cases of doubt, or where you feel that there is a need to do so, you should seek further technical advice, by following the procedures on the Indirect Tax intranet site If you decide to exercise the power, you should write to the business advising them that use of the scheme is withdrawn from the last date of their current or future tax period. It is not possible to withdraw use of the scheme retrospectively.

In such situations, a business is required under Regulation 64(2) to account and pay for outstanding VAT on all supplies made and received, not yet accounted for under the scheme rules, in the period in which the entitlement to use the scheme is withdrawn. From 1 April 2004 bad debt relief may be claimed in the period in which the business leaves the scheme (see VCAS6300). Prior to 1 April 2004 bad debt relief may be claimed following the normal bad debt relief rules.

If an offending business wishes to use the cash accounting scheme again at a later date, it may not do so until a year has elapsed. Regulation 58(1)(c)(iv) copied at VCAS2050, refers.