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VAT late registration and cash accounting

VAT late registration and Cash Accounting

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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!

 

 

Replies (5)

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By Wanderer
08th Apr 2021 18:21

Option 2.
Dunno if it is tricky, VTT+ would I believe handle it no problem if you allocated the £5k received to the £5k AND the £1k invoice.

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Replying to Wanderer:
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By Paul Crowley
08th Apr 2021 18:30

+1
Option 2 is correct
Option 1 is wrong

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Replying to Paul Crowley:
RLI
By lionofludesch
08th Apr 2021 23:17

Paul Crowley wrote:

+1
Option 2 is correct
Option 1 is wrong

+ another 1

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By Hugo Fair
08th Apr 2021 18:50

Can you apply the 'cash basis' to the retrospective period, or are you meant to clear up the mess first - before moving to the cash basis from a date when the invoices are now being issued with correct figures?
[I can see an argument that when original invoice is paid then the trigger, under cash basis, is pulled - even if that invoice (wrongly) didn't include the VAT component].
I honestly don't know - but just wondered!

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Replying to Hugo Fair:
RLI
By lionofludesch
08th Apr 2021 23:16

It's no problem.

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