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Payments on Account - cash accounting

Problem reported by Adnan Reta 7 years ago

Payments on account should be included in VAT returns when on cash accounting - Payment is received before invoice is issued.

3 Replies

Hi Adnan, I am so sorry that your question has not been responded to sooner. Could you just clarify exactly what you mean for me please?

Chris

Is presume he's referring to this:

Advance payments and deposits

An advance payment, or deposit, is a proportion of the total selling price that a customer pays before you supply them with goods or services. If you ask for an advance payment, the tax point is whichever of the following happens first: the date you issue a VAT invoice for the advance payment the date you receive the advance payment You include the VAT on the advance payment on the VAT Return for the period when the tax point occurs. If the customer pays you the remaining balance before the goods are delivered or the services are performed, another tax point is created when whichever of the following happens first: you issue a VAT invoice for the balance you receive payment of the balance So you include the VAT on the balance on the return for the period when the tax point occurs.

Example:

A customer wants to buy a bicycle from you. The total price is £200 including VAT and they pay you a deposit of £50 (including £8.33 VAT) on 1 July. You account for the £8.33 VAT on the return that covers 1 July. Before delivery your customer then pays you the balance of £150 (including VAT of £25) on 1 December and you account for the VAT of £25 on the return that covers 1 December.

Kevin has it spot on and it applies whether cash or invoice accounting. Unless you know that the final sale will take place in the same VAT quarter it is best to record an invoice 'payment on account' and pay it off to make sure the VAT is declared.

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