Cash accounting: VAT when the money moves
Under cash accounting, VAT follows payments, not invoices. See how that changes the VAT due for a quarter, and who it suits.
This path is practice in how the records and the sums work. It is not tax advice. Any rate or allowance in a question is an example for that question, so check GOV.UK for the current figures.
Task 1Two ways to time the VAT2 questions
Under standard VAT accounting, the VAT on a sale is due in the period of the invoice, even if the customer has not paid.
Under the cash accounting scheme, the VAT on a sale is due in the period in which the customer pays.
Ashby Joinery uses standard accounting. Its customers pay slowly, so it is looking at the cash accounting scheme. VAT is 20% on all its sales.
| Invoice | Net | VAT | Gross | Paid by 30 June |
|---|---|---|---|---|
| 301, Holt Builders | 4,000.00 | 800.00 | 4,800.00 | In full |
| 302, Mrs Kaur | 2,500.00 | 500.00 | 3,000.00 | Part: 1,200.00 |
| 303, Denby Homes | 6,000.00 | 1,200.00 | 7,200.00 | Nothing |
Task 2VAT on the money received4 questions
Task 3Purchases, and who the scheme suits3 questions