Small businesses will soon be able to double the amount of VAT cash they can defer payment on, thanks to the extension of an existing government scheme.
The Cash Accounting Scheme (CAS) allows eligible businesses to defer paying their VAT until they have received payment from their customers - as opposed to accounting for and paying VAT when they issue and receive invoices.
From April 1 2007, the threshold for CAS will be more than doubled, taking it from £660,000 to £1.35m.
“The extension of CAS is great news for small to medium-sized companies as they will be able to manage their biggest stumbling block – cash flow – more effectively,” said Phil Lee, partner at accountancy firm Cowgill Holloway’s small business unit.
“The government estimates that 50,000 companies will benefit from the extension of CAS which will help them to thrive.”
Most of the estimated 750 businesses that currently fail on a daily basis in the UK are smaller firms, according to credit checkers at e-bcm, who argue that small businesses find it difficult to access the resources that enable large companies to reduce their risk or chase up debts.
Upon announcing the extension of the scheme John Healey MP, Financial Secretary to the Treasury, said:
“Doubling the threshold of the CAS will allow more than 50,000 businesses to significantly improve their cash flow. We know that small businesses are the engine for the UK's economy, so it is only right that we look to improve the climate for them.”
© Crimson Business Ltd. 2007
