Overview
What is the difference between Cash and Invoice Based VAT?
When using invoice-based data entry on Business Manager, the VAT can be accounted for in one of two ways:
- it can either be claimed at the point of receiving the invoice, which is known as 'Invoice Based VAT'.
- or the VAT can be claimed at the time of paying the invoice(s), known as 'Cash Accounting for VAT'.
This may be used for businesses that issue a proportionately large number of sales invoices with VAT on them and would tend to be net payers of VAT to Customs & Excise, e.g. a contracting or haulage business.
N.B. this method of calculating VAT is only available to certain businesses whose turnover falls under a certain threshold. If you are in any doubt whether you are eligible it is important that you check with your local VAT office before opting for Cash Accounting.
Setting up your VAT calculation method on Farm Business Manager
If this is the first time that you have used the program you will be prompted to choose 'Cash Basis' when you set up the new business.
If you select the option 'Cash Basis' the VAT will not be entered against a VAT return until the invoice is paid and subsequently cleared (Cash Accounting for VAT) using Quick Pay or Ledger Payments.
Existing Businesses
If you originally set up the business with the VAT to be calculated on an Invoice Basis but you now wish to change to Cash Basis, you may alter this in the option 'Setup - VAT - VAT Settings'.
Warning! This should only be changed after very careful consideration. Any invoices and payments that have been entered previously and are still outstanding on an open VAT return will have their VAT treatment re-assigned. We would therefore recommend that you should ensure that all completed VAT periods under the old method have been closed before taking this option.
For more help on Farm Business Manager call our Adviceline team on 01594 545022 or email us at support@farmplan.co.uk.
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