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Can a Limited Company use cash basis for FRS VAT?

Flat rate VAT for Limited Company

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Hello,

I've been going round in circles on the HMRC website trying to clarify whether a limited company can operate a flat rate VAT scheme on a cash basis. Logic tells me not as they have to complete thair statutory accounts on an accruals basis, but I can't find anything in the HMRC guidance that says they can't use cash basis for VAT. Any advice would be gratefully appreciated!!

Thank you.

Replies (9)

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Scalloway Castle
By scalloway
28th Jan 2017 09:52

I don't think HMRC differentiates between limited companies and other types of business for VAT.

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By Laura C
28th Jan 2017 09:54

Thank you - that's greatly appreciated, just seems strange have main accounts as accuals basis and VAT as cash basis!

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Teignmouth
By Paul Scholes
28th Jan 2017 10:15

Hi Laura - even though you only pay over the VAT after the cash comes in, your VAT is still effectively on an invoice basis, ie you record the VAT when the invoice leaves the building and it sits there payable to HMRC, until the cash comes in.

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By I'msorryIhaven'taclue
28th Jan 2017 10:33

You can indeed use cash basis VAT for a limited company.
There's a case for stating debtors and creditors net of VAT (because the VAT liability for debtors doesn't crystallise until you receive payment, and vice versa for purchases of course). But if stating them net is tricky (because eg the client keeps double entry books with sales/purchase ledgers) then it's easier to state debtors and creditors gross; and then calculate the net VAT creditor (or net debtor) via a VAT control account in your working papers.
LATE EDIT: Just seen Paul's post to the contrary; the topic has been aired before on Aweb, but inconclusively. However, I've just noticed you're on FRS so I guess you could adopt whichever method is easier depending upon your client's particular records.

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Replying to I'msorryIhaven'taclue:
Teignmouth
By Paul Scholes
29th Jan 2017 12:00

Hi - I may not have been clear, I don't disagree, I was just saying that you record the VAT liability in the books when the invoice is recorded, it's payable, only not right away.

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Replying to Paul Scholes:
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By I'msorryIhaven'taclue
30th Jan 2017 10:10

Hi Paul, I think we were just on different tacks. We're both saying that for anyone on cash VAT accounting with double-entry books, state debtors and creditors gross in the accounts. I'd gone off on a tangent by saying there can be a case for stating debtors and creditors net in the accounts (where eg the client keeps single-entry books). It wasn't that you weren't clear, just that our posts had overlapped; which left mine looking rather as though it was contradicting yours by championing the net debtors / net creditors route.

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Replying to I'msorryIhaven'taclue:
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By mominnz
08th Aug 2018 16:43

Correct. just checked with HMRC.

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By Ruddles
28th Jan 2017 11:06

Cash accounting is nothing more than a VAT scheme available to small businesses. It has nothing whatsoever to do with preparation of accounts.

Strictly, an FRS member cannot use cash accounting but can instead use cash-based FRS accounting.

Thanks (2)
By FoxAccountancyServices
28th Jan 2017 12:40

If you are eligible for cash accounting, you can use it for FRS. I have done FRS/Cash/Annual accounting (under client duress!! LOL). The VAT control is a bit trickier, as Imsorry explains, but it can be done.

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