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HMRC internal manual

VAT Cash Accounting Scheme Manual

Cash accounting scheme: Leaving the scheme: Optional arrangements for leaving the scheme

Who can use the optional arrangements for leaving the scheme?

Businesses who leave the cash accounting scheme voluntarily, or because they have reached the exit tolerance, may opt to take a further six months in which to account for outstanding VAT incurred while they were using the scheme. Businesses do not need to notify if they decide to use the option.

Businesses who choose the option must adopt normal accounting for supplies made following the period in which they leave the scheme. Cash accounting records must be kept for supplies made and received while the business was using the scheme. These records must be kept separate from records for supplies made under normal accounting rules during the six months. You will need to ensure that VAT has been accounted for on monies received during the six month period which relate to supplies made under cash accounting.

Who cannot use the optional arrangements?

Businesses cannot use the six month option if:

  • the value of their taxable supplies in the three month period ending at the end of the period in which they cease to be eligible to use the scheme is more than £1,350,000;
  • they did not leave the scheme at the end of the period in which the value of their annual taxable supplies exceeded the exit tolerance; or
  • they are removed from the scheme for protection of the revenue, because they have committed an offence or been assessed to a penalty.


If a business has difficulty in paying its outstanding tax on ceasing to use the cash accounting scheme, local DMUs may grant time to pay under the usual provisions. If such an application is received, you should consider it in accordance with the guidance in the Debt Management and Banking Manual.