Authenticated receipts periodic payments contract - tax points and accrual dates

Question asked by Laura Harrington 5 years ago

Hoping someone might be able to help...

We are a subcontractor working for a main contractor who issues us with authenticated vat receipts as per HMRC guidance if you make supplies, including design, advisory and supervisory services, under such a contract, the tax point is normally the time you either issue a VAT invoice or receive a payment, whichever happens first. As we receive authenticated vat receipts we don't issue a VAT invoice but we raise a bill on the system.

I only enter the bill once I receive the 'payer notice' which outlines the final date for payment i.e the date we will receive payment and the date at which VAT applies therefore this is the date I raise on the bill.

However as the the work has physically been carried out up to a month prior to the payment being issued I use the accrual date function so that all of the figures tie in i.e. materials and subcontractor payments etc and for reporting purposes on the profit and loss otherwise for example I would be accounting for work in May (payment date) that has been carried out in April.

I have noticed that when I do this, the accrual date pulls through on the VAT return and not the invoice date (payment date) so I would effectively be paying the VAT on that invoice early. How can I stop this as the tax point is the date the payment is issued but I need to use the accrual function so that reporting is correct.

Hope that makes sense

Many thanks, Laura

4 Replies

Thanks Laura - that's much clearer and you are right there's no way the accrual feature should influence the VAT reporting, it never used to when I used it and so this should be reported to support as a defect.

You are also not the first person in the to ask for more CI functionality but hopefully someone in CB is reading this and will add you to the list!

Hi Laura

I'm a little confused by the above but if I set out the basics here it may help.

The tax point for VAT starts with the date of supply but generally is replaced with the invoice date (strictly only if raised within 15 days of the supply date). You are right though, if payment arrives earlier, then the payment date replaces the invoice date as the tax point.

The contractor's "self billing" VAT receipt is, effectively, your VAT invoice and so you should be dating the invoice you create in CB as the same date. This I think will do away with the need to use an accrual date.

Regardless of the tax point most small businesses are allowed to account for their VAT on a cash basis, ie when the money comes in or out and it's not clear from your question whether you have enabled this in CB, ie in the "Manage VAT schemes" settings. In other words, whilst the VAT is recorded in the books from the invoice it's only released to the VAT return when it's paid.

In case you are not aware of this here's a recent post:

Hope that helps

Hi Paul

Thanks for the reply, unfortunately our turnover means we would not qualify for the cash accounting vat scheme as it will be over the threshold by our year end.

You are correct in that I date the invoice raised in CB the same as the date on the authenticated vat receipt however the reason I use the accrual function is for reporting purposes because if for example our total revenue in February was £180k and I date this on our invoice on CB as March (the payment date on the self billed authenticated vat receipt) but in March our total cost of sales is £230k (we are highly governed by weather and also how many properties are available to us, some weeks its 30 properties others it could be 10 depending on other trades etc.) then our profit and loss statement would show a loss in March of £50k.

This is why I use the accrual function and it generally works as we are on quarterly vat returns but some work we accrued/carried out in April is showing on my April 2017 vat return even through the bill date/tax date is May and I don't actually have to pay this across until the July 2017 vat return, obviously I don't want to have to pay anything across earlier than I have to.

Hopefully that makes sense? Not sure there is a work around here, Clearbooks would be brilliant if it had a construction package add on that covered retentions and also self billing/periodic payments contracts.

Thanks Paul, I will speak to support. Not being from an accounts background I love Clearbooks and selected it because its user friendly for those new to bookkeeping and accounts but mainly because of the CIS function and I believe it is popular with the CI because of this. Fingers crossed this might be coming soon!

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