VAT timings

JodieR

Got a new client yesterday - they've been doing their own VAT for years and intend to continue to do so - but they've been declaring the VAT on sales on the accruals basis and reclaiming VAT on purchases using the cash basis. I pointed out that they were paying over VAT earlier than they need to but they didn't seem bothered and don't want to change the system they use. Do you think it would cause any problems if they got an enquiry?

stevo5678

I don't see there being any issues with this especially since there is no advantage. Sometimes it is easier to do it a particular way based on how the client keeps their records and as you state it's only a timing thing

peaman

Strictly speaking, you are supposed to treat both inputs & outputs on a accruals basis or both on a cash basis.

However, I have seen lots of clients do just as your client is doing, several of which have had VAT inspections and either the inspector didn't notice, or they didn't care.

I have had three VAT inspections where the inspector made an issue of this. On one, they told the client that they had to change to an accruals basis and issued an assessment for the VAT underpaid. On the other two they just advised the client that they should change one way or the other, but they didn't issue any assessments, they basically got a telling off!

I would advise the client accordingly, if they don't want to change at least you have warned them of the consequences.