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VAT Cash accounting

Is this classed as a payment?

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VAT Cash Accounting

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Company A is owed £60k from Company B, which is a connected company.

Company A provides services to Company B totalling £48k. My question is, no money is going to be exchanged between the parties because the amount due will contra against the loan balance between the entities reducing the debtor to £12k, but does this transacation count as a payment for VAT Cash accounting purposes and therefore the VAT can be reclaimed by Company B.

Has anyone had this argument with HMRC and is there any legislation to back up an argument?

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10th Oct 2018 08:32

I vote “yes”.

Is A on cash accounting as well?

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10th Oct 2018 08:40

The legislation is VAT Regulation 57(a) which refers to "payment or other consideration."

The date of payment is the date the contra is accounted for.

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