Accounting for VAT on final FRS return

Client deregistered from FRS VAT - how do we account for sales receipts in final return?

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Client deregistered from FRS VAT (14.5%) effective 31/3/2017 to avoid limited cost trader 16.5% rate.

Was operating cash accounting.

Last quarter was to 02/17.  Final return for one month 03/17.

How do we account for VAT on sales invoices issued prior to 31/3/2017 with VAT accounted for @ 20% but where funds not yet paid?

The client has book debt outstanding at 31/3/2017 of £44,000.  He is unsure when this will be paid but it is not a bad debt.

Presumably, on deregistration:

  1. Cash accounting is cancelled and all output VAT is due to be paid to HMRC regardless of whether received or not?
  2. Monies received post registration, ie after 31/3/2017 will still be subject to old Flat Rate of 14.5% and not 16.5%?


Replies (5)

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By Ruddles
06th Apr 2017 07:50

He can't have been using cash accounting. He was probably using cash-based FRS. But he can, if he wants to, use cash accounting as soon as he leaves FRS. If he does, he simply accounts for VAT at the FRS rate applying when the supplies were made.

A further point - unless he has changed his VAT return cycle, there will not be a one-month return to 31 March 17.

And, for clarity, when you say 'deregister' I assume that you mean merely leave the FRS, and not actually deregister?

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Replying to Ruddles:
By hall_simon
06th Apr 2017 09:36

Ruddles thanks for your reply.

is there any difference between the cash accounting scheme and cash based FRS other than application of the FRS %?

He has chosen to deregister from VAT as of 31/3/2017 as not worth being registered.

Final VAT return period is one month to 31/3/2017.

Much of the final sales income will take a few months to received post 31/3/2017. How is accounted to HMRC once final VAT return is filed?

so, the FRS % of 14.5 applies to receipt of income post 31/3/2017 relating to sales invoices raised before 31/3/2017.

thanks for your help.

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Replying to hall_simon:
By Ruddles
06th Apr 2017 10:49

Practically there is no difference between the two cash schemes, but legislatively there has to be a distinction (eg because Cash Accounting says that you can recover input VAT when you apy your suppliers - which you obviously cannot do if using FRS).

If your client has in fact deregistered from 31/03/17 he will be treated as having left FRS on 30/03/17 and will therefore need to account for VAT (at 14.5%) on all outstanding income at that point, ie include it on his 31/03/17 return.

Thanks (1)
Replying to Ruddles:
By lavalamp
06th Apr 2017 16:51

Sorry to cut in - but having just done this for myself and also struggled to find the correct answer, I eventually found out that the VAT on all outstanding income should be included on the final return at 20% (not 14.5%) - hence the reason for leaving the FRS scheme the day before deregistration - all final adjustments are done at the rate of 20%.

On the final day of your registration you account for VAT, at 20% on:
• Sales made on that final day.
• Supplies you made whilst you were using the FRS for which payment has not been received.
• Any capital expenditure goods or pre-registration stock, on which you recovered input tax at the time of registration and which are still on hand.

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Replying to lavalamp:
By Ruddles
06th Apr 2017 17:13

Who told you that nonsense?

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