New client should have registered for VAT from 1st November but didn't register until 16th February. HMRC have requested first tax return to be from 1st November to 31st March.
All client's business is supplying VAT registered customers so he has raised VAT only invoices for the sales between 1st November and 15th February which his customers have accepted. However some of those VAT only invoices have not been paid yet. We will do his VAT returns on a cash basis.
Example December 1st invoice was originally 5,000 at that has been paid. 16th February a VAT only invoice for 1,000 was raised but this has NOT yet been paid.
Should we include the December 5,000 "paid" invoice on this VAT return (Box 6 sales ) but with no VAT and then include the VAT only of £1000 (Box 1 output VAT) on his next VAT return when the VAT has been paid?
Or should we include sales of 4166.66 on this current VAT return (Box 6) and the VAT due on 4166.66 of 833.34 (Box 1) on this return (making 5,000 in total). And then report sales of 833.33 (Box 6) and VAT of 166.67 (Box 1) on the next VAT return when the VAT only invoice will have been paid?
Tricky for the bookkeeping software!