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GST cash accounting scheme for small businesses

How the cash accounting scheme works

Standard GST accounting

Using standard GST accounting, the GST you pay relates to the return period when the supply is made (normally the return period when you issue the invoice).

Cash accounting scheme

The cash accounting scheme allows you to account for GST when you receive payment, which is usually later, and may be in a later return period. This means that you will not have to pay GST until you have been paid by your customers.

Which businesses can use the cash accounting scheme

You can use cash accounting if your taxable turnover (excluding capital asset sales or GST) did not exceed £1,250,000 in the previous 12 months, and can continue to use the scheme until your taxable turnover exceeds £1,500,000 in any 12 month period.

You can't use the cash accounting scheme if: 

  • the taxable turnover of your business exceeded £1,250,000 in the last 12 months
  • you use the retail scheme for more than 50% of the turnover of your business
  • you are registered for GST as part of a group registration
  • you left the cash accounting scheme in the past 12 months
  • more than 20% of your purchases and expenses are from, or more than 20% of your sales are to, one or more 'connected persons' (normally a relative). Connected persons has the same meaning as in Article 3 of the GST law 2007)
  • you are not up to date with your GST returns and payments
  • you are insolvent, en desastre or in administration

Business Records under the cash accounting scheme

Using the cash accounting scheme is likely to require that you maintain additional business records. 

You will still be required to maintain the books and records specified by the Taxation (Accounting Records) (Jersey) Regulations 2013 and Article 75 Goods and Services Tax (Jersey) Law 2007 and GST Direction 2008/22.

Additional records

You will also be expected to keep records to show how you derived, on the basis of the records referred to in the above paragraph, the cash accounting figures actually entered onto your quarterly returns whilst you are operating the cash accounting scheme.

How to commence cash accounting 

You will need to choose a future GST return period as the first period for which you intend to apply cash accounting. Make a note at the same time in your business records to document this decision.

This note must also detail and explain the additional records you will be keeping in order to show how you derived, on the basis of the records you already maintain, the cash accounting figures to be entered onto your quarterly returns whilst you operate the scheme.

Changes to your business that require you to stop using the scheme

After you begin the cash accounting scheme you must stop using the scheme within 30 days if there are significant business changes that may affect your eligibility to remain in the scheme.

For example:

  • your turnover is, or is likely to be, more than £1,500,000 in the coming year (eg because you buy another business or set up a new branch)
  • you become insolvent, en desastre or enter administration 

How you complete your GST return

Under this scheme, you complete GST Returns as normal, but include only those sales for which you have been paid (or part that you have been paid), and purchases and expenses for which you have paid your supplier (or part that you have paid). Your output tax is the GST on payments received for sales you have made, and your input tax is GST on the purchases and expenses you have paid for. 

You must use the scheme for all your sales. Your accounting system must therefore be able to identify when payments are received and made, and provide the information you need to complete your GST Returns on this basis.

However you will need to be careful not to count output tax twice when you first implement the scheme.

Sales

On the first GST return you make using cash accounting, in your sales figures (boxes 1 to 3), and GST on sales (box 6), only include payments received for sales you have made during that GST period. Do not include any payments relating to sales included in an earlier GST return.

Purchases and expenses

In your purchases (box 4) and input GST (box 7) figures, only include payments you have made for purchases and expenses during that GST period. Do not include any payments made for purchases and expenses included on an earlier GST return.

Imports

You may need to make similar adjustments for one or two further GST periods. Imports of goods should always be accounted for on your GST return (box 5) covering the date on which the goods arrived in Jersey. If you receive services from outside Jersey you can choose to include the value in box 5, either when you receive the services or when you pay for them.

Leaving the cash accounting scheme

You may leave the scheme voluntarily at any time.

If you do so you should again document this decision as part of your business records and specify the date on which this decision was taken. Your final cash accounting period will terminate at the end of the GST period in which this decision was taken, and your first non-cash accounting GST period will begin on the following day.

You must leave the scheme at the end of the GST period if:

  • you sell your business or you stop trading
  • your taxable turnover exceeds £1,500,000 in any 12 month period
  • the nature or structure of your business changes so that you expect turnover to exceed £1,500,000 in the 12 months ahead
  • you use the retail scheme for more than 50% of the turnover of your business
  • you are registered for GST as part of a group registration
  • more than 20% of your purchases and expenses are from, or more than 20% of your sales are to, one or more 'connected persons' ('connected persons' has the same meaning as in Article 3 of the GST law 2007)
  • you are not up to date with your GST returns and payments
  • you are insolvent, en desastre or in administration 

We may remove you from the cash accounting scheme if you:

  • calculate your GST incorrectly on two or more returns (each case will be treated on its merits)
  • are convicted of a GST offence
  • receive a penalty for GST evasion

Your final cash accounting return

On your final return using cash accounting, you must include output GST on all your business debtors at the appropriate rate of tax, but can claim input tax on all your business creditors (where you have been charged GST).

The next GST return must be completed using standard GST accounting.

Submitting and paying the GST

GST returns are due, and tax payable by the last day of the month following the end of the GST period.

Using the cash accounting scheme alongside other GST schemes

You can use the following schemes alongside cash accounting:

  • annual accounting scheme
  • margin scheme for the motor trade
  • tour operator margin scheme for supply of holidays in Jersey 

GST annual accounting scheme for small businesses
Motor trade GST margin scheme
Tour operator GST margin scheme​​​

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