Use the Cash Accounting Scheme
Sometimes referred to as Cash VAT accounting, the cash accounting scheme allows you to account for VAT (output tax) on your Sales on the basis of payments you receive, rather than on tax invoices you issue.
If you choose to use the scheme, you can only reclaim VAT incurred on your Purchases (input tax) once you have paid your Supplier.
You are eligible to begin to use the scheme if you expect the value of your taxable supplies (excluding VAT) during the next year (beginning at the start of a tax period) will be £660,000 or less (correct at April 2004).
Please note that this is only one of the conditions set by the HM Revenue and Customs.
Full rules and conditions can be found on the HMRC web site - HMRC Reference:Notice 731 (April 2004)
Cash Accounting
Access Accounts handles Cash Accounting by using the Allocation of funds, received and paid, as being the date of payment for Cash Accounting purposes. You will then use special ACR reports to extract this information and to complete your VAT Return. You will not be able to use the VAT Return produced by the system.
There are some transactions that are excluded from Cash Accounting:
Goods that you buy or sell under lease purchase, hire purchase, conditional sale or credit sales agreements.
Goods imported or acquired from another EC Member State (or goods removed from a Customs warehouse or free zone).
These transactions should be processed in Access Accounts by using three new VAT Rates created for this purpose:
VAT Rates 10, 11 and 12 should be used for transactions that are excluded from Cash Accounting.
When excluded transactions are processed you must ensure that one of these special VAT rates is used.
This can be done simply by creating new Analysis codes for the purpose.
Transactions that use VAT rates 10,11, or 12 must be entered via the Sales or Purchase Ledger. This will enable you to identify them and adjust them out of your Cash VAT figures. They should not be posted via Nominal Journals.
If you are registered for the Cash Accounting Scheme, you will need to compile your own VAT Return and some Access Crystal Reports have been provided to help you to do this.
Limitations
Because Access Accounts handles Cash Accounting by using the date of Allocation of funds, it is very important that you take great care when making Allocations and Allocation Corrections.
We recommend that corrections are always undertaken by completely un-allocating funds before re-allocating the funds against different transactions.
We also recommend that you should NOT mix VAT codes 10, 11 and 12 with Cash VAT accounting codes within transactions. Crystal reports cannot split out detail lines if VAT code has been changed on these.
Important note about Reverse Charge Goods:
If you are operating under the Cash Accounting scheme, VAT Code V (Reverse Charge Goods) should not be used in an attempt to account for reverse charge goods. You should contact your support provider for advice.
Reporting
Reporting is done via special Access Crystal reports.
Open the VAT menu option and select Access Crystal Reports.
The Cash Accounting Scheme reports are:
Non Cash VAT Transactions Report
NL Cash VAT Guidance Report
Purchase Ledger - Cash VAT Guidance Report (prepared in Crystal Version 9).
Sales Ledger- Cash VAT Guidance Report (prepared in Crystal Version 9).
The purpose of these reports is to identify transactions posted within a specified date range and may be used to assist with compiling your VAT Return.
You should not use the VAT Return produced by the software.
These reports follow guidance from HM Revenue & Customs. However, you should be aware that there are limitations in the ability of the reports to cope with very complex transactions, for example if you issue an invoice containing multiple rates of VAT and then receive part payments and part credits, the accountable tax reported may not be correct.
The reports are provided as a guide and you should check the validity of the transactions, especially if the type of scenario described above is applicable to your business.