HMRC internal manual

VAT Cash Accounting Scheme Manual

VCAS6450 - Cash accounting scheme: Leaving the scheme: Allowing a business to use the scheme in exceptional circumstances

Regulation 60(3), copied at VCAS6100, gives the Commissioners the discretion to allow a business to stay on the scheme in exceptional circumstances. This means that the Commissioners may allow businesses that experience a “one off” increase in sales to continue to use the cash accounting scheme uninterrupted.

Notice 731 (GOV.UK) states that you may be able to remain on the scheme if you meet all of the following criteria:

  • the ‘one off’ increase has not happened before and is not expected to happen again, for example, the sale of a capital asset
  • the sale arose from a genuine commercial activity
  • there are reasonable grounds for believing that the value of your taxable supplies in the next 12 months will be below £1,350,000.

Businesses must keep a record of how they came to their decision to remain on the scheme. If we find that you do not meet all the conditions then we may exclude you from the scheme immediately, or from the date your ineligible use began.

The bullet points are indicators of the way the discretion would normally be used. If a business meets these conditions, but you consider that continued cash accounting would represent a threat to the revenue, or if there are exceptional grounds for allowing continued use where the above conditions do not apply, discuss matters with the appropriate Senior Officer. In cases of doubt or where you feel that there is a need to do so, you should complete a ‘request for technical advice’ and refer the case with full details and a reasoned recommendation to Accounting, Registration and Exports. Guidance on making a submission for advice can be found on the Getting advice page on the VAT Directorate Intranet site.