Andrew Needham looks at VAT cash accounting and how to deal with part payments and barter transactions.
The cash accounting scheme is a valuable concession for small businesses. If a businesses’ turnover does not exceed £1,350,000 a year it can use the scheme without having to apply to HMRC.
The business issues tax invoices as normal, but only accounts for VAT when, and to the extent, that payment is received. The business gets a cashflow advantage, which can be considerable depending on how long customers take to pay their bills, not to mention automatic bad debt relief on unpaid bills.
Part payments
If a customer makes a part payment of an invoice, VAT is only due on the payments actually received and the amounts are treated as being VAT-inclusive.
For example, a 
