Correcting errors on flat rate VAT cash accounting - help!
Client hasn't charged VAT on expenses recharged to customers (eg hotel bills, mileage etc) and wants to make a voluntary disclosure to get everything up to date.
They have been using flat rate cash accounting since their second VAT qtr (first one being on cash accounting scheme) so we are a bot confused as to what to do.
Do we just take the flate rate % from the cash actually received even though VAT was undercharged or do we inflate the undercharged invoices for VAT and declare the flat rate % on the additional amount (even though it was never received!).
Added compliation (although more easily resolved) is client didn't tell us they were using cash accounting previously so last quarters was done on invoiced basis and also needs correcting to fall back in line with previous treatment!
Any advice would be very welcome
You pay over the FRVAT on receipts.
At the rate rulling when the invoice was raised.
Flat rate
You will need to raise additional sales invoices for the expenses and when you receive payment you account for VAT under the FRS. Not sure voluntary disclosure as you describe is appropriate.
Presumably they have been approved by HMRC to use FRS.
Malcolm McFarlin
www.mandrtaxadvisers.com