FURTHER GUIDANCE FOR CLIENTS USING CASH ACCOUNTING

The time at which you account for VAT depends on the date of the payment, and not on the date of invoice. However, the rate at which VAT should be charged will still depend on the date of supply.

To establish the date of supply, please refer to our separate help sheet. This will determine the rate at which VAT is charged.

Unless you use the flat rate scheme:

• The amount of VAT that you should pay over to HMRC should always equal the amount that you have charged. Likewise, the amount that you claim on allowable business costs should always equal the amount that you have been charged.
• For a period of time after 1 December, you will need to account for VAT on receipts and payments at different rates. This period will finish when you have received the last receipt in respect of a pre 1 December invoice, or when you have made the last payment of an invoice on which 17½% VAT has been charged.

However, if you use the flat rate scheme:

• You will need to apply the old flat rate to receipts that were invoiced with 17½% VAT, and you will need to apply the new flat rate to receipts that relate to invoices raised after 1 December. This process will finish once the last pre 1 December invoice is settled.
• You need not worry about payments or expenses as no VAT can be reclaimed on them.

For manual accounting systems, the above changes should be relatively easy to implement. For computerised systems, please refer to our separate help sheet.