What is the UK VAT Cash Accounting Scheme?
The VAT Cash Accounting Scheme is an optional accounting arrangement for eligible VAT-registered businesses. Under the scheme, businesses generally account for output VAT when customers pay, rather than when an invoice is issued.
Input VAT is generally recovered when suppliers are paid, subject to the normal VAT recovery rules. This differs from standard VAT accounting, where the relevant tax point often determines when VAT is reported.
Cash accounting can be useful for businesses that offer customers credit terms or experience delays in receiving payments. However, it is not necessarily advantageous for every business.
UK VAT Cash Accounting Scheme thresholds
Expected VAT taxable turnover must generally be no more than this amount over the next 12 months.
Businesses already using the scheme generally need to leave when taxable turnover exceeds the applicable exit threshold, subject to HMRC rules.
These thresholds serve different purposes. The £1.35 million threshold is relevant when considering entry into the scheme, while the £1.6 million threshold applies to businesses already operating under it.
Passing the turnover test alone does not establish full eligibility. Other conditions and exclusions may apply.
How to use this calculator
- Estimate your VAT taxable turnover for the next 12 months.
- Enter the amount in pounds sterling, excluding VAT.
- Select Calculate.
- Review the result against the scheme's turnover threshold.
- Check other eligibility conditions before deciding whether to use the scheme.
Use Reset to restore the original input value. The result controls also allow you to copy, share or print the calculation where supported by your browser.
How the turnover test works
For a business considering joining the scheme, the basic turnover comparison is:
Expected VAT taxable turnover ≤ £1,350,000
If expected turnover is at or below the joining threshold, the business may satisfy the turnover condition for entry. If it exceeds that threshold, the business generally cannot newly join under the ordinary turnover test.
This is a threshold comparison, not a calculation of VAT payable or a complete assessment of scheme eligibility.
VAT Cash Accounting eligibility examples
Example 1: Expected turnover of £900,000
- Expected VAT taxable turnover: £900,000
- Joining threshold: £1,350,000
- Amount below threshold: £450,000
The business meets the basic joining turnover test. Other eligibility requirements must still be checked.
Example 2: Expected turnover of £1,400,000
- Expected VAT taxable turnover: £1,400,000
- Joining threshold: £1,350,000
- Amount above threshold: £50,000
The business exceeds the normal entry threshold. It would generally not qualify to newly join based on this turnover test.
Example 3: Business already using the scheme
Suppose an existing scheme user has taxable turnover of £1,500,000 over the relevant period. This is above the normal joining threshold but below the £1.6 million leaving threshold.
The business may be able to continue using the scheme, provided it satisfies the applicable continuation conditions. A joining-threshold calculator alone cannot determine that continuation decision.
Advantages of VAT cash accounting
One potential advantage is improved cash flow. Businesses with customers who pay slowly may avoid accounting for output VAT before receiving payment, where the scheme rules apply.
It can also make VAT timing more closely reflect actual customer receipts and supplier payments. For some smaller businesses, this may simplify the practical management of VAT cash flows.
Disadvantages and limitations
Cash accounting is not always the most suitable approach. Because input VAT recovery is generally tied to supplier payment, businesses that buy substantial goods or services on credit may need to wait longer to recover VAT.
Certain transactions and circumstances may also be excluded from the scheme. Businesses should review eligibility restrictions, record-keeping obligations and relevant HMRC guidance before adopting it.
Cash accounting versus standard VAT accounting
Under standard VAT accounting, the tax point generally determines when VAT is accounted for, even where payment has not yet been received.
Under cash accounting, VAT timing generally follows qualifying payments received and made. The difference is especially relevant for businesses offering extended payment terms.
The best choice depends on the business's payment patterns, purchases, customers and VAT circumstances.
Does meeting the turnover threshold guarantee eligibility?
No. The turnover threshold is only one requirement. Businesses must also meet other HMRC conditions. Restrictions can apply based on VAT compliance history and other circumstances.
This calculator does not examine those additional requirements. It should therefore be used as an initial turnover screening tool rather than an official eligibility determination.
Official HMRC guidance
For the full rules, see the official GOV.UK VAT Cash Accounting Scheme guidance .
Check the current rules before making a decision, particularly if your turnover is close to a threshold or your business has complex VAT transactions.
Frequently asked questions
What is the VAT Cash Accounting Scheme joining threshold?
The normal joining threshold is expected VAT taxable turnover of £1.35 million or less over the next 12 months, subject to other eligibility conditions.
What is the VAT Cash Accounting Scheme leaving threshold?
The published leaving threshold is £1.6 million. The rules for existing scheme users differ from the conditions for newly joining.
Is VAT cash accounting mandatory for small businesses?
No. It is an optional scheme for eligible VAT-registered businesses.
Can I join the scheme if my turnover is £1.4 million?
Expected VAT taxable turnover of £1.4 million exceeds the normal £1.35 million joining threshold. The basic turnover condition for joining would therefore not be satisfied.
Does the calculator calculate the VAT I owe?
No. This tool checks the turnover threshold relevant to the Cash Accounting Scheme. It does not calculate a VAT return or determine the amount payable to HMRC.
Is this an official HMRC calculator?
No. CalculatorsOnline is an independent website. This tool provides an informational estimate and is not affiliated with HMRC.
Related UK VAT calculators
Important: This calculator provides an initial turnover-based estimate only. Actual eligibility depends on all applicable HMRC conditions. It does not constitute tax or financial advice.
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