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Cash Accounting VAT

jiltjilt Font Of All KnowledgeRegistered Posts: 2,903
HMRCs guidance states that if you pay your supplier by direct debit then the date you make payment is the date the payment is debited from your bank account.

If payment for utilities is by budget account how do I account for it? Do I treat the monthly direct debit as VAT inclusive, and then put an adjustment in when usage is billed? Suppose it's possible for telephone accounts, but with gas and electric if they're a low user VAT will be at 5% but you won't know until the bill arrives.

Am now confused :confused: How do others account for it?

Comments

  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    I have occasionally seen utility suppliers issue VAT receipts for monthly payments in order to help customers reclaim the VAT. You could request them?
  • jiltjilt Font Of All Knowledge Registered Posts: 2,903
    Monsoon wrote: »
    I have occasionally seen utility suppliers issue VAT receipts for monthly payments in order to help customers reclaim the VAT. You could request them?

    Yeah I have seen some from an electricity company in the past, this is BT, my favourite! I'll give it a go, I'll pretend I work for the company.

    Ah well thanks Jenni, tried it but BT said no! Maybe I could try HMRC lol
  • jiltjilt Font Of All Knowledge Registered Posts: 2,903
    HMRC say to treat the monthly payments as VAT inclusive and put an adjustment in when the bill arrives. And I was only on hold for 4.5 minutes!! :ohmy:
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Wow, result.

    what, HMRC said you can have the VAT without a VATreceipt? Did you get that in writing? :lol:
  • anniemanniem Experienced Mentor Pewsey, WiltshireRegistered Posts: 1,325
    BT are a real pain, they seem to have stopped itemising the VAT out on some bills recently, and I never know quite what to do.

    I've got one to do at the moment and I know it's only pennies:

    Unlimited plan £47.34
    Friends & Family £2.97
    Processing payment (bill says not subject to VAT) £4.50

    TOTAL £54.81

    Phone useage £3.25

    TOTAL INCL VAT £58.06

    I think there is VAT included in £47.34 + £2.97 + £3.25 = £53.56 being £45.58 net & £7.98 VAT.

    But I'm not certain if there is VAT on phone usage?

    Does anyone know?
    FMAAT - AAT Licensed Member in Practice - Pewsey, Wiltshire
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Surely if they don't specify the total amount of VAT they are in breach of the requirements for what needs to be on a VAT invoice?

    Yes there is VAT on phone call charges, with the exception of calls made from mobiles when abroad (I think).
  • anniemanniem Experienced Mentor Pewsey, WiltshireRegistered Posts: 1,325
    I agree; I think they have an obligation to itemise VAT on the invoice, but I have to deal with several BT bills which no longer show VAT separately.
    FMAAT - AAT Licensed Member in Practice - Pewsey, Wiltshire
  • JodieRJodieR Experienced Mentor Registered Posts: 1,002
    Those £4.50 fees for BT are usually late payment charges, so if your client sets up a regular dirct debit they'll not incurr those fees. One of my clients is on the regular payments plan from BT and they get monthly VAT invoices issued with the VAT amount on it and then the usual bills as well.
  • jiltjilt Font Of All Knowledge Registered Posts: 2,903
    There's a vat breakdown on BT bills, if its a bill will lots of pages its usually on page 2
  • jiltjilt Font Of All Knowledge Registered Posts: 2,903
    JodieR wrote: »
    One of my clients is on the regular payments plan from BT and they get monthly VAT invoices issued with the VAT amount on it and then the usual bills as well.

    Interesting, BT told me we'd have to change to monthly bills rather than a budget account in order to get monthly VAT bills
  • anniemanniem Experienced Mentor Pewsey, WiltshireRegistered Posts: 1,325
    jilt wrote: »
    There's a vat breakdown on BT bills, if its a bill will lots of pages its usually on page 2

    Honestly, the VAT isn't identified as a single amount anywhere! It's a nuisance!
    FMAAT - AAT Licensed Member in Practice - Pewsey, Wiltshire
  • jiltjilt Font Of All Knowledge Registered Posts: 2,903
    anniem wrote: »
    Honestly, the VAT isn't identified as a single amount anywhere! It's a nuisance!

    That's pants!
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    jilt wrote: »
    That's pants!
    Report them for non-compliance :lol:
  • anniemanniem Experienced Mentor Pewsey, WiltshireRegistered Posts: 1,325
    Monsoon wrote: »
    Report them for non-compliance :lol:

    Really? How?
    FMAAT - AAT Licensed Member in Practice - Pewsey, Wiltshire
  • coojeecoojee Experienced Mentor Registered Posts: 794
    anniem wrote: »
    Honestly, the VAT isn't identified as a single amount anywhere! It's a nuisance!

    Sounds like it's a personal account (unlimited plan and friends and families are only available on personal accounts) and hence no VAT showing separately. If it was a business account then the VAT would be shown.

    As a personal account I'm not sure you can reclaim the VAT anyway, it has to be in the name of the business.
  • jiltjilt Font Of All Knowledge Registered Posts: 2,903
    Well spotted I hadn't picked up on the friends and family bit. If it's a sole trader working from home then he's ok with a personal account.
  • anniemanniem Experienced Mentor Pewsey, WiltshireRegistered Posts: 1,325
    jilt wrote: »
    Well spotted I hadn't picked up on the friends and family bit. If it's a sole trader working from home then he's ok with a personal account.

    Yes, sole trader working from home - but shouldn't need a business account, so why don't BT put the VAT on?
    FMAAT - AAT Licensed Member in Practice - Pewsey, Wiltshire
  • TheAbacusTheAbacus New Member Registered Posts: 13
    Utility & Phone Bills

    This thread has moved from the OP, which I hope has been answered. These DD’s are a real pain and have to be posted as a poa. Unfortunately with cash accounting, and using a package like Sage, you have to enter the VAT and if it is then included on a VAT Return you can’t change it. When the bill arrives it usually shows the current charges and the payments already made.

    The thread seems to have moved to a discussion about utility and telephone invoices. I went into this in some depth a couple of years ago when I applied for dispensations for all my payroll clients and I found the answer depends on the type of contract.

    From the earlier comment which included Family and Friends it sounds as though this is a residential contract, in the name of an individual, and suppliers do not always produce VAT invoices for these (mobile bills are the worst). The reason is that if the contract is in the name of an individual VAT cannot be reclaimed and is not an allowable expense for income tax (home telephones, for example, only the net cost of business calls can be claimed).

    The conclusion I came to is that utilities and phone companies know this and only show the full information on business account invoices. As jilt says BT include a VAT analysis and with BT OneBill Plus bills there is a VAT statement.

    I would be interested to hear how others have got on claiming these expenses.
  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    TheAbacus wrote: »
    The reason is that if the contract is in the name of an individual VAT cannot be reclaimed and is not an allowable expense for income tax (home telephones, for example, only the net cost of business calls can be claimed).

    Not true.

    I think you are confusing the rules for reimbursement of employee's home telephone bills with both the income tax rules for sole-traders and the VAT rules. All three very different pieces of legislation.
  • TheAbacusTheAbacus New Member Registered Posts: 13
    Yes I must admit, by reference to disbursements, I was referring to reimbursement of expenses and the problems when contracts are taken out in a person’s name and then put through a business (especially when the business is run from home and the charges are a domestic/residential tariff). This seemed to be the drift of the tread above.

    There was no mention of sole-traders but I would be interested to hear how these bills are treated for them. Can they really claim the things like line rental against tax and the VAT when the phone or electricity is for the residence and business use is secondary?
  • coojeecoojee Experienced Mentor Registered Posts: 794
    TheAbacus wrote: »
    This thread has moved from the OP, which I hope has been answered. These DD’s are a real pain and have to be posted as a poa. Unfortunately with cash accounting, and using a package like Sage, you have to enter the VAT and if it is then included on a VAT Return you can’t change it. When the bill arrives it usually shows the current charges and the payments already made.

    A while back I used to do the accounts of a rugby club, they were cash accounting and paid their phone bill by monthly direct debit. I seem to recall that I entered the phone bill/statement that came every quarter that did have the VAT on it and then when I entered the monthly payments Sage was clever enough to allow the VAT on the monthly payment. It certainly did something as I only ever entered the monthly payment as a supplier payment on the account and didn't adjust the VAT and then just put in the actual VAT invoice as and when it came in, Sage did all the rest.
  • TheAbacusTheAbacus New Member Registered Posts: 13
    coojee wrote: »
    I seem to recall that I entered the phone bill/statement that came every quarter that did have the VAT on it and then when I entered the monthly payments Sage was clever enough to allow the VAT on the monthly payment.

    Was that by entering the invoice and then posting payments against it? That works, but the problem I keep coming up against is that monthly payments are made by DD in advance, as poa, and then a quarterly bill showing those payments and the balance c/f arrives in arrears.
  • coojeecoojee Experienced Mentor Registered Posts: 794
    TheAbacus wrote: »
    Was that by entering the invoice and then posting payments against it? That works, but the problem I keep coming up against is that monthly payments are made by DD in advance, as poa, and then a quarterly bill showing those payments and the balance c/f arrives in arrears.

    No, there was a bill/statement that showed actual usage for the previous quarter and then a statement showing where they were up to with their payments. Some times they were in arrears and sometimes they were paying up front. I just posted the invoice and the payments to the supplier account and Sage sorted the VAT out. I used to match payments against bills when there were sufficient payments to cover a bill to avoid having an account as long as your arm but it made no difference to the VAT whether they were matched or not, POA's were still accounted for.
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