Switching from normal VAT cash basis to Flat Rate Scheme cash basis

[Stuartb3502]

We are switching for the period just closed from normal VAT to the Flat Rate Scheme. We use cash basis for VAT and cash basis under FRS.

We have some invoices that are dated before the period start but paid in period. Looking at HMRC guidance it appears that we just include any actual payments received in the period as under FRS regardless of invoice date. I say that because notice 733 says...

"9.3 What if I used Cash accounting before joining the Flat Rate Scheme?
You carry on as before. There is no need to pay the VAT your customers owe you when you change schemes. Include any payments you receive whilst using the Flat Rate Scheme in the total to which you apply your flat rate percentage."

and the guidance on tax point says...

"Exceptions
If you use the VAT Cash Accounting Scheme, the tax point is always the date the payment is received."

Which all seems quite clear (ha!).

However, the software we use (not naming on purpose) does not do this when producing a VAT return. The vendor has explained that it is treating the invoices dated in the previous period as falling under the normal (i.e. not FRS) VAT scheme even though they are paid in the FRS period.

We have discussed the above points and they say that they consulted accountants and ran test scenarios against other accounts software and believe they are correct.

Any views here?

 

[Chart Accountancy]

Your situation is quite unusual for opting to move to the FRS as with the introduction of the LCT most businesses are better off under standard scheme. In answer to your question, you are right in reading the guidance. You can indeed apply the FRS% when you receive the payments from your clients.

It is when you leave the FRS, you are permitted to still apply FRS% on debtors for payments received after moving to the standard scheme. This is may be what has confused your software provider as this is the more common change in vat schemes.

 

[Stuartb3502]

Thanks very much. Yes - whether moving to FRS was a good idea is a whole 'nother matter. I did assess our purchases and we were OK in the previous quarter and likely for the year but not in the quarter just gone! HMRC were as useful as usual - I filled in the application and waited for them to let us know when we would be on the scheme (as it says they will). Eventually contacted them and was told that the FRS team is a little busy so they're not providing confirmations. I did ask whether I could use the "a bit busy" excuse if my returns are late but they didn't answer for some reason