VCAS9050 | Cash accounting scheme: Previous changes to the scheme: Rules in force at 1 October 1987

The Regulations and conditions in Notice 731 allowed businesses to use the scheme provided that:

• the annual value of their taxable supplies did not exceed £250K;

• all returns including surcharges and penalties had been paid;

• the Cash Accounting scheme had not been withdrawn in last 3 years;

• it had not been convicted of a VAT offence in the last 3 years;

• a compound offer had not been accepted in the last 3 years;

• a civil evasion penalty had not been imposed in the last 3 years;

• the business had agreed to comply with conditions set out in Notice 731;

• HMRC had approved their application to join the scheme;

• the business uses the scheme for the whole of its business;

• it stayed in the scheme for 2 years (unless turnover tolerance exceeded);

• a cash-book was kept summarising all payments made and received or other satisfactory record;

• receipted tax invoices were issued and kept showing the date of payment;

• the scheme was used from the beginning of a tax period; and

• the scheme is not used for:

• goods imported

• goods removed from a warehouse

• goods removed from a free zone

• hire purchase transactions

• conditional sale transactions, or

• credit sale transactions

When businesses became ineligible to continue using the scheme

Businesses became ineligible to continue using the scheme:

• if they were assessed to a compound penalty or entered into a compound settlement agreement;

• if a civil penalty was imposed;

• if a serious misdeclaration penalty was imposed;

• if a penalty for regulatory offences was imposed (eg belated notification);

• if a surcharge assessment was raised;

• if a false statement was made on the application to join the scheme; or

• for the protection of the revenue.

Regulations and conditions for leaving the scheme

The regulations and conditions in Notice 731 regarding leaving the scheme were:

• businesses must notify the LVO if they left the scheme;

• if tolerance of £312,500 was exceeded businesses must leave the scheme on the anniversary of joining it;

• if leaving voluntarily (business must have used scheme for 2 years), the business could leave on its anniversary of entering the scheme: the business had to account for supplies and purchases made whilst on the scheme as if they were still using the cash accounting scheme;

• if the scheme was withdrawn the business had to account for all outstanding tax on their next return;

• if selling a business as a TOGC the transferor must tell the new owner to apply to continue using the scheme;

• when deregistering, businesses had to account for all outstanding tax on all supplies and purchases made in the last 12 months, on their final return;

• insolvent businesses who ceased trading, other than for the disposal of stocks and assets, had 2 months in which to account for supplies made and received during the previous 12 months.