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HMRC internal manual

VAT Cash Accounting Scheme Manual

Cash accounting scheme: Previous changes to the scheme: Changes introduced on 3 July 1997

Budget Notice 16/97 issued on 2 July 1997 announced the following changes. The changes were also published on 22 October 1997 via update 2 to the May 1994 edition of Notice 731.

  • Supplies that will not be paid for in full within 6 months from the date of the issue of the VAT invoice were excluded from the scheme.
  • Supplies where an invoice is issued before the supply takes place were excluded from the scheme.
  • HMRC were allowed to deny access to the scheme to protect the revenue.
  • If a business exceeds the £437,500 tolerance it must leave the scheme immediately and account for all outstanding tax as it leaves the scheme.
  • Businesses leaving scheme (not those expelled) were allowed to adjust their records for amounts relating to bad debts.
  • Businesses were no longer automatically expelled from the scheme if they claim input tax before having paid.
  • Businesses were no longer automatically expelled if they incur a surcharge.
  • Businesses were no longer automatically expelled if they incur a misdeclaration penalty.
  • Businesses were no longer automatically expelled if they incur a penalty for regulatory offences.
  • Businesses becoming insolvent were required to account for VAT due on all supplies made and received up to the date of the insolvency.