VAT P&L Forecast

[mwt.taylor88]

Hi All,

I have been told not to include VAT (payments or reclaims) in my forecast P&L. Is this right?

I ask because when I look at my end balance for Y1 in my cash flow forecast and compare it to Y1 net profit in my P&L, my cash flow end balance figure looks too low when considering I haven't deducted things like e.g. Corp tax, depreciation, starting balance from the cash flow figure.

Now I know these 2 numbers aren't comparable, however the cash flow end balance being £31k and my P&L net profit being £29k indicates something is a miss.

I have picked through the sales, COGS, expenditure figures on both statements and they are right. The only difference is I have included VAT on the cashflow and not on the P&L. This suggests that the advice I got to exclude VAT from P&L is wrong. Can someone clear this up for me?

Hope that makes sense

Many thanks
Matt

 

[Bob]

Are you or will you be VAT registered?

 

[mwt.taylor88]

Hi Bob,

Yes we are VAT registered

Thanks

 

[Scalloway]

Yes you should exclude from the P & L. You have to include VAT in the cash flow as it will be paid as part of the transaction. The difference in cash is VAT due to HMRC that you are holding until you pass it on to HMRC.

 

[mwt.taylor88]

Thanks for reply.

So you are saying the only difference between cash flow end balance and P&L net profit should be the outsanding VAT owed to HMRC?

Can I confirm VAT in calculated for 3 months and paid in the fourth?

 

[Scalloway]

VAT returns are done quarterly. The payment is made in the fourth month.

 

[HBR_Business_Consultants]

Hi Matt, depending on your turnover, you might want to report you VAT on a cash basis rather on invoice/accruals basis. I.e. you only pay the vat on your sales invoices once your customers have paid you. Depend on your trade level this could significantly help your cashflow.
Thanks

Richard Hall
Director
HBR Business Consultants Ltd