VAT - Cash Accounting System

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Does anyone use this system? Operating our accounts on Sage and have recently entered into an interest free credit agreement for the purchase of a computer and peripherals. I realise the journal should be debit net value of assets and related VAT and credit the creditor but in a cash accounting scheme the VAT can only be reclaimed on actual payments made. When I come to enter the DD details I can't include VAT as this has already been entered (thereby not claiming VAT) but if I take it out of the journal so I can include it in the DD payment this upsets the fixed asset entry.

Have called the accountant's office and they understand what I mean but have no solution. On the verge of entering this as a simple invoice and reducing every month but surely there must be a more technical and appropriate way to deal with this. Any help anyone?

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:VAT - Cash Accounting System

    posted an answer but deleted it realising it wasn't very good!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:VAT - Cash Accounting System

    Thanks for replying. The accountants thought they had helped, to be fair, but they hadn't taken the cash accounting into account, if you follow me! So if I followed their instructions I would either end up not claiming any of the VAT back or there being an amount of VAT sat in the control account forever when the DD doubled up the VAT element.

    Sure there must be a technical way around this but didn't want to sit on hold waiting for Sage assistance.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:VAT - Cash Accounting System

    My God lincs you were quick at deleting!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:VAT - Cash Accounting System

    We have some clients on cash accounting but I read on a Customs leaflet that if any VAT requires claiming on fixed assets it has to be all done when the asset needs introducing rather than with each payment. this would resolve all your entry problems as the VAT would be reclaimed in the month of purchase.

    Please someone correct me if I'm wrong.

    Annette
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:VAT - Cash Accounting System

    Hi Annette

    That sounds right but I don't know how to enter it - cash accounting only recognising VAT when it is actually paid or received. Have been on the phone with Sage support for over half an hour and they don't seem to know - their Senior Technicians suggesting I phone the VAT office. Haven't done this as yet as I know they will say this is a technical query for Sage. Have tried a few different variations on the journals including entering a T9 code for the DD payment but this will only mean the VAT is not recognised as having been paid and cannot therefore be claimed.

    Thought it was a good idea to take advantage of the interest free - would have been no problem at all if this was a straightforward bank payment.

    Thanks for responding - may just end up entering it as an invoice - not technically correct I know but at least I know the VAT will be correct.

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:VAT - Cash Accounting System

    FYI I had a quick glance through the cash accounting section of the HMIR website and couldn't find anythin to help.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:VAT - Cash Accounting System

    Hi there,
    Although in my firm i did not use Sage accounting package,i used simlar packages.
    Our VAT is on none-cashing accounting ,so the entry for assets normally is no problem.I have never thought if VAT is on cashing accounting ,there is indeed a problerm.I also really want to dicuss with you in order to undertand what the prober way to deal with it?
    In your letter you mentioned DD,i assume it means direct debit,is it something to do with financial leasing or operating leasing (maybe not just a thought)
    chaoliss
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:VAT - Cash Accounting System

    Sorry,wrong key :oops:
    my point is whatever kinds of scheme on ,the assest entry should always be
    Dr Asset - Computer
    V A T - Computer
    Cr Creditor/Bank
    Now the problem is how to entry the payment ?
    In my accouting package ,there are none-cashing and cashing accounting for VAT,so when chose either of them ,it will have different result;my point is although we have enter the VAT on VAT account ,if VAT in only on cashing accounting ,there will be no VAT showing VAT account untill we paid,so if we do payment by D/D monthly decrease Creditor ,can we phycially enter matching VAT amount on each payment ?
    so in the end on VAT account it will showing double amount but when you print out report on cashing accounting ,in theory it should only showing VATamount on cashing accouning !!
    Sorry ,my answer purely is based on my personal work experience and account software,if any mistakes please do let me know!!
    Chaoliss
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:VAT - Cash Accounting System

    Hi Chaolissaat

    I think I know what you mean and agree that only the VAT element of the actual payment will be reconciled for the VAT Return. What I don't want though is the full doubled-up VAT element sitting in the Purchase Tax Control Account forever because it hasn't been reconciled to a payment. I think this would look very strange.

    Have spoken with HMCE this morning and they confirmed that what I was doing was correct but couldn't comment on how Sage was treating it and as everything Sage has suggested throws up all sorts of anomolies I may have to enter it as an invoice. I have one more method which I have only just thought of this morning - bit of jiggery pokery but it will work - just not technically correct.

    Thanks for all your responses.

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