Landlord Rent invoices under VAT Cash Accounting | AccountingWEB

Landlord Rent invoices under VAT Cash Accounting

I searched through this site and was unable to find a relevant answer, so hope someone can help.

My new client runs a restaurant, and is on VAT cash accounting. How can I determine whether this is best for her?

Her biggest issue is the Rent, service charge and insurance invoices from the landlord. These are sent from the landlord as "Application for Payment". When they are paid, they send out a tax invoice which is obviously when the VAT can be reclaimed.

Because my client tends to delay payment of each invoice by several weeks, I am finding it nigh on impossible to keep track of the landlord's payment "applications" and the actual payments made. It is made worse by the fact that the previous bookkeeper had failed to reconcile these since he had started some two years previously.

Does anyone have a foolproof method of recording these Applications and Tax invoices in Sage preferably. (Treat the Application as a regular invoice and when payment is made in full and the VAT invoice received, then credit the initial Application?)

I do use a spreadsheet but 4 invoices each for Rent, Service Charge and Insurance each per year, plus ad-hoc Service Charges, plus changes in Insurance and VAT rate changes plus copy Applications with different dates, have all led to the biggest mess. While I can work on reconciling the the older stuff, I would like to be able to record properly for the new transactions.

Many thanks



Witch-Queen's picture

Re: Landlord Rent invoices under VAT Cash Accounting

Witch-Queen | | Permalink

Hi iMichael

Firstly, I cannot see what possible benefit Cash Accounting can be for a restaurant. IMHO it is, in fact, detremental to the business.

The whole idea of Cash Accounting is to delay paying over the input VAT until the Customer has paid the invoice, therefore delaying it's inclusion on a VAT return until it has been paid, so improving cash flow where customers take a long time to pay.

However, in the case of a restaurant, or any retail premises come to that, the sales are paid on the day, therefore 100% of the Input VAT is being declared on the Return. However, as the same method is applied to the Output VAT, the client can only claim back for those purchases that have been paid for.

I also have a client who receives these type of Applications for Lease, Service Charges etc. and have used this method sucessfully for many years, for a client also on Cash Accounting

When the Application arrives post it to Sage as a normal invoice with 'APP' as the invoice number (Ref) and the detalis of what it is for in 'Details'. When the VAT invoice arrives (usually a couple of days after payment) go into Corrections and change the date and Ref of this entry to the correct ones as shown on the VAT invoice, then pay off the invoice, and then staple the real invoice to the application in the filing.

I find this method works as, when you look at activity, any still showing a ref of APP are either unpaid or awaiting the receipt invoice and can be easily tracked.

Sage cash accounting works by analysing only the Monies in and out. It does not include Invoices. So it is the date of the payment that is important, not the Invoice date.

Like you, I also inherited this client from a bookkeeper who had made a mess of this, she'd posted both the Applications AND the Receipt Invoices to Sage thus doubling everything in the accounts, yes it will take a while to sort out, but I asked the supplier to send me an account history and that helped enormously as it only showed the real invoices.

if you need any further help email me at [email protected] and I will reply with my phone number should you wish to talk it though further.


Karen (Witch-Queen)


Thank you

maxmillion | | Permalink

Many thanks for your comprehensive answer Witch-Queen.

I appreciate it. It was just what I needed and I like your suggestion about keeping track of the applications and invoices by prefixing the ref with APP.

Meanwhile I have suggested to my client, to contact her accountant regarding the suitability of the chosen VAT method as I don't think I am qualified to directly make the decision, though it will make my work easier.

Thank you again and for your kind offer of letting me contact you again directly.


Hi    1 thanks

Carolynne | | Permalink


I would also agree.  As the restaurant is predominantly a cash based business, they should not be on cash accounting at all.  This is more for people who don't receive sales receipts for ages and therefore don't have the cash to pay the VAT over.  Restaurants receive their sales receipts on the same day, and are therefore able to pay their VAT over, and it is as Witch-Queen pointed out, detrimental to the client not being able to reclaim the VAT on purchases until they are paid.




Witch-Queen's picture

Re: Thanks

Witch-Queen | | Permalink

You are very welcome Michael, I am glad my reply was useful to you.

I use Sage all day every day for a large number of clients, in a great variety of trades, so I usually know the answer to these more unusual senarios as I have had to work out the best way to do it in the past.

If your client does decide to change to Standard VAT accounting, I can help you process the change in Sage.

Although I don't get on AW of often as I would like nowadays, you have probably seen my name in the Sage forum a lot on past posts.

You are welcome to keep my contact details should you need it in the future, many on here have done so, and regularly contact me if they have a problem


Fmaat's picture

Output and input vat.

Fmaat | | Permalink

"However, in the case of a restaurant, or any retail premises come to that, the sales are paid on the day, therefore 100% of the Input VAT is being declared on the Return. However, as the same method is applied to the Output VAT, the client can only claim back for those purchases that have been paid for". 

I'm sure it's an oversight but I do believe output vat is the vat trader declares on sales input vat is the vat the trader claims back.

Best regards.

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