VAT Flat Rate Scheme

[JulianHobbs]

Question for all you fellow accountants out there:

When using cash accounting on the VAT flat rate scheme and a purchase of a item over £2k is made, VAT can be reclaimed as for normal input tax. However, say payment for the item is made over 2 VAT qtrs - ie £5k in this qtr and £5k in the next one, how is the input tax reclaimed? I presume being as cash accounting is used, the reclaim in this qtr should be restricted to the cash actually paid (ie £5k), and the remaining VAT balance re-claimed in the next qtr.

Anybody know if this is right?
Thanks, guys!
Julian

 

[MyAccountantOnline]

I havent actually come across this yet but my thoughts would be that it qualifies as a single purchase of capital goods and as such you could reclaim the VAT. I do see why you question it though.

The FRS guidance just seems to refer to the purchase of capital gains and doesnt seem to mention payment - although I havent looked at it in detail.

If it were me I'd call the VAT helpline and ask them to confirm noting the call reference number.

 

[3pic]

I presume being as cash accounting is used, the reclaim in this qtr should be restricted to the cash actually paid (ie £5k), and the remaining VAT balance re-claimed in the next qtr.

Anybody know if this is right?
Thanks, guys!
Julian

Yes, that is correct, you reclaim the input tax as and when the invoices are paid (per cash accounting rules) and you are making the reclaim becuase the single capital item is over £2k and just being billed over two invoices/periods.

 

[elaine@cheapaccounting]

Now I shall throw a spanner - to claim vat you need a valid vat invoice:

http://www.hmrc.gov.uk/vat/managing/reclaiming/vat-receipts.htm

So taking that would it not be that you claim in accordance with what is shown on the purchase invoices you have.

 

[JulianHobbs]

Thanks for the replies, guys
I checked with the Central Helpline - like me they were surprised by the complete absence of guidance for this situation. In the end, a technician advised me to reclaim the full amount in the current quarter (as long as a valid VAT invoice exists) and not worry about the split payment across two VAT quarters.
Thanks!
Julian

 

[Jaydee]

In the end, a technician advised me to reclaim the full amount in the current quarter (as long as a valid VAT invoice exists) and not worry about the split payment across two VAT quarters.

Intuitively, that advice seems that it must be wrong.

How can a trader on cash accounting be advised to reclaim before payment "and not worry about the split payment"?