What Wendy means is whether or not some things will be included on the VAT return twice - once under one scheme, and again under the other.
Typically, this can happen in Sage (at least up to the version I have - 2013) when going from invoice to cash based accounting: You raise an invoice for (say) £1000 + VAT; on the invoice-based VAT scheme, you pay the VAT on that invoice when you do the VAT return. If you switch before the invoice is paid, when the customer does pay up Sage will include the VAT element on the payment. (And the same applies to invoices on the purchase ledger where the invoice is received and dealt with prior to the switch, but paid after).
When going from cash to invoice based, though, it's the other way around - if memory serves, anyway. i.e. after the switch, Sage doesn't take into account the unpaid invoices on the system prior to the point of switching. You need to take steps to address deal with it. (i.e. you need to calculate just how much outputs and inputs VAT is due on any unpaid sales and purchase invoices on the system prior to the switch and adjust your first VAT return afterwards to include it all).
Having read your advice and the historical post you pointed me to, would you please clarify if the steps outlined below should ensure no input or output is overlooked?
1) As soon as the next quarters VAT is calculated and submitted and prior to switching to Invoice Accounting, I run the following reports: Outstanding (unpaid) sales and purchase invoices and credits.
2) Carry on until the next VAT return is due. Calculate which outstanding items have been paid over or received since the previous VAT return and add the input/output VAT for these manually. And repeat until there are no outstanding invoices/credits (sales or purchase) from the original VAT return when the switch was made. FYI the nature of the business I work for is that it can be 90-120 days until a client settles.
In addition, whilst the VAT due to be paid or reclaimed in the return before the changeover will not really be any different, am I right in thinking the "double hit" will come in the following return.
Many thanks in advance, you have been most helpful.
Your step 2 sounds wrong to me - unless I'm misreading it!
The wording suggests you are looking at those specific invoices (those that were raised or received prior to the switch, but still unpaid at that point) and in effect treating them on a cash basis; only adjusting each subsequent VAT return to reflect payments/receipts against those invoices - in other words operating a hybrid cash/invoice scheme depending on when the invoices are dated.
Unfortunately, that's not an option. When you leave the cash accounting scheme, the outstanding VAT on all unpaid sales invoices becomes payable (and the VAT on all unpaid purchase invoices becomes reclaimable).
i.e:
1) Complete the final VAT quarter on the old (cash) scheme.
2) Switch from the cash scheme to the invoice scheme in Sage.
3) Run the reports for the outstanding sales and purchase invoices and credits.
4) Come the end of the next VAT quarter, adjust the return for the VAT showing on all the reports in #3.
"FYI the nature of the business I work for is that it can be 90-120 days until a client settles."
Ouch. I can certainly understand why you'd want to hybridise it under those circumstances. :(
There is a mitigation, though: You can ask HMRC for extra time to pay the VAT due as a result of switching. (IIRC, if you ask them nicely [don't start any correspondence with "Dear Blood-sucking-leech-monsters"] they'll allow up to six months.)
Edit: it seems I get confused when counting from 1 to 4. This could be a problem in this business. ;)
-- Edited by VinceH on Monday 23rd of May 2016 03:26:42 PM
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
If I remember rightly from your other post, you use Sage One (horrible piece of kit!) Anyway they do full instructions on their help site. The one I sent a link to, that Vince has included, refers to sage 50.
Edited to add - just realised your other post was about sage one PAYROLL.
-- Edited by Cheshire on Tuesday 24th of May 2016 09:52:34 AM
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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
