Lots of building contractors have had to consider VAT this year. The new Construction Industry Reverse Charge has exercised many.
One detail in HMRC guidance is that Reverse Charge entries cannot be accounted for within Cash Accounting.
Some contractors have been advised that, therefore, they must no longer use Cash Accounting. This is not the case. A contractor can continue to use Cash Accounting as long as Reverse Charge transactions are accounted for outside Cash Accounting. That is the meaning of VAT Regulation 58(2)(g). It may be that the contractor will continue to benefit from Cash Accounting for his other non-reverse charge transactions.
How you account for Reverse Charge transactions outside of Cash Accounting will depend on your software of course. And that’s where I submit to my Accountant and Bookkeeper colleagues to help the contractors.