VAT return question

Minky

Hi everyone,

I have just become a member in practice, and I have a question re VAT returns.

Is it better to do VAT returns on a cash basis or on an accrual basis? I also work for an employer part time and they always go with the cash basis (i.e. only put the VAT on the return once a purchase invoice has been paid and once a sales invoice payment has been received).

I dont remember this method from my studies (which was 8 years ago now I admit) but as my employer isnt a qualified accountant, just by experience, so I wanted AAT professional opinions. I am sure in my studies we prepared VAT returns on an accrual basis.

I look forward to your replies.

Thanks
Debbie

claudialowe

It all depends on the business......

If you are a cash based business (eg a shop), then you are better off on standard VAT accounting, whereas poor old me who has to give everyone credit and only get credit from my stationery company, is better off on cash accounting.

You need to look at the figures and see whether you owe more than you are owed.

You owe more = standard accounting
Owed more = cash accounting

Does this help?

Claudia

groundy

Completely agree with Claudia:thumbup:

claudialowe

Groundy

You can be on my team :thumbup::thumbup::thumbup:

Claudia

mark057

The cash accounting method is best used for invoicing businesses which suffer from bad debts or from late payers.

It's also incredibly useful to businesses with a very tight cash flow.

It must be noted however that a business adopting the cash accounting method cannot reclaim input tax on any items purchased until they have paid for the items in question.

Minky

Thank you so much for your replies. They are much appreciated and have been really helpful. Its scary starting up as a MIP for the first time, and I want to get everything correct. I am sure you will hear more of me with more questions that I will think off in the near future. Thank you once again!:001_smile:

Bluewednesday

May I recommend that you also have a good read of the different VAT schemes available. We have found that IT contractors seem to fare better on the flat rate scheme than the normal schemes.

lorraine

Minky wrote: »

Hi everyone,

I have just become a member in practice, and I have a question re VAT returns.

Is it better to do VAT returns on a cash basis or on an accrual basis? I also work for an employer part time and they always go with the cash basis (i.e. only put the VAT on the return once a purchase invoice has been paid and once a sales invoice payment has been received).

I dont remember this method from my studies (which was 8 years ago now I admit) but as my employer isnt a qualified accountant, just by experience, so I wanted AAT professional opinions. I am sure in my studies we prepared VAT returns on an accrual basis.

I look forward to your replies.

Thanks
Debbie

Hi Debbie,

Just out of interest do you have any clients lined up? or do you have a plan of action set up to get clients?

Just asking as I have been a MIP since Dec 08 but I havent had a client as of yet.