Vat issue Flat rate/ cash accounting mix up

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Have a client who was  set up on flat rate scheme, but for last two years have been submitting returns on a cash accounting basis. This has now been picked up by HMRC and want paperwork on all returns from 6.15 - 12.16. The problem being that over this time a large percentage of the companies sales are to EU related (no vat charged. Therefore on the FRS they get hammered when they are included in the percentage charge as compared to cash accounting.

Ive not come this  before what is the revenue likely to do, as there is £5k difference to pay if using FRS as opposed to what has been submitted on cash accounting . All returns and payts are always on time next return due 7.5.17

Dont want to go back to HMRC unless I'm armed with an idea of what they will do?

Your commenst would be appreciated

 

Replies (7)

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Teignmouth
By Paul Scholes
12th Apr 2017 15:17

Hi - not sure what difference it makes that this is cash accounting, FRS VAT is payable on zero rated sales. I assume these are sales of goods?

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By kirkr555
12th Apr 2017 16:26

My question is will Hmrc accept that vat is on cash accounting and not frs as if they work it on frs will cost an extra 5k

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Replying to kirkr555:
By Ruddles
12th Apr 2017 16:43

Please explain exactly what you mean. Forgetting about Annual Accounting, there are 4 basic methods for your client to account for VAT.

Accruals-based FRS;
Cash-based FRS;
Accruals-based Standard Accounting; and
Standard Accounting using Cash Accounting

The issue is really about FRS v Standard. The 'cash accounting' bit is irrelevant and, I suspect, confusing you.

Although, to be fair, perhaps you do - unlike many others here - actually understand the importance of using the correct terminology. If he has been using Cash Accounting then, by definition, he can't have been using FRS.

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Replying to Ruddles:
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By kirkr555
12th Apr 2017 18:27

That's my question they r set up as cash based frs yet been submitting returns cash based cash accounting the difference is about 5k more if u calculate the same periods with frs
This is due to large percentage of Euro sales where vat hasnt been charged
Will Hmrc insist on paying this or will they accept back dated notice for ca

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RLI
By lionofludesch
12th Apr 2017 16:27

Are you saying he just abandoned the FRS without telling anyone ?

Trying to make sense of your query......

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By kirkr555
12th Apr 2017 17:32

Yes that's right
Now trying to sort fall out
Looking to find out what Hmrc will do

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Replying to kirkr555:
RLI
By lionofludesch
12th Apr 2017 17:43

OK - well the FRS has a cash accounting version too, so that's where the problem lay.

He should've told them. He'll have to go back to using the FRS.

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