VAT on payments for invoice raised before VAT?

Unpaid invoice raised before VAT Reg, business using cash accounting

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Hi 

Business just registered and got VAT number but it's got unpaid invoices for almost £50k raised a month, some, two months ago and without VAT on them.

If clients makes payments now since we are VAT-registered do we have to calculate VAT on the payments received? We are on cash basis.

All answers appreciated thank you.

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By fawltybasil2575
08th Jan 2020 17:24

@ Anonymous (OP).

In the circumstances described by you, and since impliedly the cash received from the registration date includes “cash re goods and services supplied by you BEFORE that registration date”, then such “cash re goods . . . . . . . date” is excluded from the Output Tax calculation. The rationale is that those goods/services have NOT been supplied during the business’s registration.

There is of course a corresponding Input Tax exclusion in relation to payments made from the registration date re supplies received on or before that registration date. There is a slight caveat to this exclusion in my next paragraph below.

Please read VAT Notice 731. In so doing, please note the availability of Input Tax claims re goods which have been received up to the day before the registration date but which are still in hand at the registration date (and a similar, but not identical, claim re services).

One would not normally opt to use the Cash Accounting Scheme without first seeking the guidance of one’s accountant (assuming they are “qualified” to provide such advice). Such advice would include the necessity to operate an accounting system which would enable monies paid and received to be clearly LINKED to the preregistration supplies.

Basil.

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