Given the information above what amount represents the VAT which should be charged on the invoice?
Here's my problem- Since I don't know if the customer will pay within 10 days to take up the 5% discount offer, I would apply the VAT on £3600 making the VAT £720.
I've been told that's not accurate, and that we always calculate VAT on the discounted amount whether the customer took advantage of it or not.
Can someone explain?
Thanks a lot.
-- Edited by Maria LR on Friday 12th of February 2016 07:35:01 PM
The person telling you to always calculate VAT on the discounted amount is wrong (hope that its not the teacher!!!). That used to be the case but the rules changed in April 2015.
VAT must be accounted for on the amount actually received.
Sure that we must have a full explanation on here or Aweb that will help you... Hang on a sec... Here you go, try reading this which should help you :
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I did a knowledge test and they've marked me down on it. Hence why I am asking because they are even contradicting their book, which I have quoted when I emailed them.
Oops, sounds like it was the teacher! Thats not a good sign.
Glad to help Maria.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Study texts and exams have not been updated, at least in AATs case.....had yo explain the changes yo my son recently! So to get through the exam you need to understand the old method, but for real life the new!
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
At the time of issuing the invoice to the customer the supplier will not know whether the invoice will be settled within the period of time which allows the customer to take advantage of the prompt payment discount on offer, or whether the customer will settle the invoice in full. Therefore, having initially issued an invoice with VAT calculated on the full price of the goods/services supplied, should the customer choose to pay the discounted price the supplier will have to adjust their records to show the amount received, the discount allowed to the customer and the output VAT actually received."-
And then it goes on to quote the regulations from the HMRC website. I just checked, they are word for word.
Study texts and exams have not been updated, at least in AATs case.....had yo explain the changes yo my son recently! So to get through the exam you need to understand the old method, but for real life the new!
Joanne,
The text does not mention the old method at all. (see my previous post)
It discusses the credits note process and the statement that the customer can only recover as input tax the VAT paid for when the customer does take advantage of the PPD.
That to me suggests the question is based upon the 2014 FA.
Reason being, as of FA 2015, there is no point in asking that question.
-- Edited by abacus12345 on Friday 12th of February 2016 08:35:33 PM
I do think the text is based on FA 2015 but the test question is based on FA 2014. However, the text does not mention the old system, so if I go according to my text (let's say as a newbie), I would not know the old method at all.
I know, I am putting waaaaaay too much energy on this, but what about other students who have no background in VAT? They are being misled which will not help their careers, the companies they will work for and the businesses they will work with.
I'm off to feed the children now, I don't particularly want to become the meal today.
You've sort of answered your own question there lol.
Good for you to be doing extra reading. Qudos for that. For future reference, just take care that your exam / test is inline with the current FA you are reading elsewhere.
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Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
Study texts and exams have not been updated, at least in AATs case.....had yo explain the changes yo my son recently! So to get through the exam you need to understand the old method, but for real life the new!
Hi Joanne,
FA15 is available for Osborne study texts on Amazon. Might be worth confirming with your training provider that the exams will be based on the same finance act that you are currently reading.
I was looking at those the other day as I was quite impressed that the AAT use actual current year tax forms so there is an element of box filling where you don't get that with ACCA which is all about the computation and tax strategies rather than the nuts and bolts. Personally I think that one needs a mix of the two which AAT has to my mind got right.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
it does sometimes happen when publishers move versions of books forwards from one finance act to another the people amending the books simply adjust things like rates and occassionally questions are not amended properly where they have been fundamentally amended by a finance act.
Even major publishers like Kaplan generally release a sheet of amendments for their texts post publication, to gain access to which you need to log onto their site to access.
It may be worth asking your tutors whether there have been updates released to your text and if so whether you can have a copy of them. If not perhaps suggest that a mailshot be sent to all students on the course pointing out this and any other known issues in the text.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Melville is also available in FA2015. Great book. Waiting for the 'New' ACCA releases from bpp.....
Already out John : http://www.amazon.co.uk/ACCA-P6-Advanced-Taxation-FA2015/dp/1472744322/ref=sr_1_3?s=books&ie=UTF8&qid=1455311378&sr=1-3&keywords=p6+fa2015
and http://www.amazon.co.uk/ACCA-F6-Taxation-FA2015-Study/dp/1472744233/ref=sr_1_3?s=books&ie=UTF8&qid=1455311641&sr=1-3&keywords=f6+fa2015
I'm waiting for the Kaplan text (just personal preference) for P6 which has been defered this year.
Already got the Melville text (so good that I've got (almost) every edition back to FA06)
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Study texts and exams have not been updated, at least in AATs case.....had yo explain the changes yo my son recently! So to get through the exam you need to understand the old method, but for real life the new!
Hi Joanne,
FA15 is available for Osborne study texts on Amazon. Might be worth confirming with your training provider that the exams will be based on the same finance act that you are currently reading.
I was looking at those the other day as I was quite impressed that the AAT use actual current year tax forms so there is an element of box filling where you don't get that with ACCA which is all about the computation and tax strategies rather than the nuts and bolts. Personally I think that one needs a mix of the two which AAT has to my mind got right.
Hi Shaun
It was AAT level two using the old process.
Maria-AAT never mentioned the old v new method, in fact Kaplan taughtthe old method as if things hadn't changed and when challenged by my son (who is working part time for me so gets the real lowdown!) they basically just said 'don't worry about the chnages, you just need to learn the way I'm teaching you for the exam!'
Shaun- level 3 training notes and exam relates to relevant year finance act, so am assuming those notes are correct, but I've not looked at his notes. Might have a look before I cart them all off to his new flat(which this chat has just reminded me I need to do once his internet is set up and he can finally get back to studying, so thanks for that-BKN useful for allsorts)
(sorry for any typos, back to using no glasses and so dodgy typing usually occurs!)
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
That to me suggests the question is based upon the 2014 FA.
Reason being, as of FA 2015, there is no point in asking that question.
What's changed in FA 2015 please.
Hi John,
see my Aweb link towards the top of the thread (2nd post in).
HTH,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
It was added to the FA 2014, this piece of legislation came into force on the 1st April 2015.
For exam questions, set for FA 2014, the assumption is this wouldn't have made their textbooks by then.
ACCA (F6) makes a mention of the change, although they say that the method for calculating VAT at the beginning of the FA 2014 will continue to be used for the entirety of the exam period. (Exams from 1 April 2015 - 31 March 2016)
(ACCA FA 2014 F6 BPP p366)
-- Edited by abacus12345 on Friday 12th of February 2016 10:52:06 PM
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Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
By the way, HLC says that in fact the ebook is based on FA2015 but the test is still based on FA2014. I asked why I was being penalised for something which has been omitted on the ebook and they referred me to a section on the VLC which says the following:
"The way settlement discounts have been accounted for within invoicing changed in April 2015, the eBooks have been updated to reflect the new method but this will not be tested until 2016, with this in mind, please see the attached file for a help document on how they are calculated and recorded in Sage One. The examples shown are for reference only and should not be entered into your case study for your course materials."
The only one problem is that you don't see this message until after you have finished with the manual course and have moved onto computerised bookkeeping as this message shows under the computerised version. They are going to look at my grading after I showed discontent with being penalised for information which has been omitted from the ebook whilst being tested on it. And I've requested this message to be added onto the manual version as well in the VAT section.
I paid a lot of money for the course (levels 1-3), and I was not going to let them mark me down on something to which the are at fault.
