Still to discuss this with the client.
That is what i had originally thought but this does not recognise the liabilities for deposits due to customers.
Thanks for all your comments - especially at this time of the year - can see a way forward now.
Don't Forget that the VAT now paid will reduce his profits for prior years - he will have paid tax on turnover and this must now be reduced for the VAT paid. This should result in tax refunds which could help with the cash flow.
Also where any of his customers VAT registered - if so you could issue credit notes for the original invoices and reissue them with VAT.
The customer will then pay him the VAT and claim it on their next VAT return so they won't be out of pocket.
Our client cant always reclaim Exempt Input Tax as they go over the limits and the % recovery of residual input tax changes each year - therefore we can't tell at the start of a year how much Exempt Input Tax would be recoverable (if any).
If we told the insurance company that say 50% was recoverable and then the calculations only show 20% our client would lose out and we would be doing them a disservice.
The contractor invoiced the client (the invoices are made out to the client) and then the client made a separate recovery from the insurance recovery so the Input Tax is for the client.
The supply was not made to the insurance company - they never received goods or services - these were supplied to the client's property.
Here you go
Or search in the app store
Use the APP
CH provide a free App and you can add all your clients to it - shows at a glance what is overdue and becoming due. If Annual Return is a month overdue I get in touch with client.
Vision Technician and Marine Surgeon
AKA window cleaner and fishmonger
The company should recognise the amount due for services as a liability because there was an obligation to pay at the balance sheet date and also the prepayment for the expense of 5 months.