VAT - Changing from Cash Accounting to Standard
This describes a process of changing a business vat scheme from cash accounting to standard.
The difference in the schemes
Under the cash accounting VAT scheme output tax is only paid for in the VAT period in which payment is received from a customer. Input tax is claimed in the VAT period in which payment is made to a supplier. The change from the cash accounting to the standard scheme means that VAT on documents that are outstanding must usually be accounted for on the VAT return for the period in which the business leaves the cash accounting scheme and must be paid on the normal due date for that return.
Note in some circumstances the business may be entitled to pay the outstanding amount over the next six months. It is strongly recommended the user consults with their advisor for eligibility before doing this.
When can a change normally be made?
A business must leave the scheme if it becomes ineligible or it may choose to leave. Reasons for leaving the scheme voluntary may include: -
- It is no longer beneficial
- record-keeping requirements cannot be met
Again is is strongly recommended the user consults with their advisor.
The scheme must be left at the end of a VAT period.
Dealing with the Change in Liberty Accounts - Summary
- Confirm the final cash accounting VAT period
- Process all outstanding transactions that should be in that period
- Accept and file the VAT return for that period
- Run the All Trading Up To VAT transactions report at the date of the current VAT period end
- Run the extract report for the details of all previously filed VAT returns on the system
- Compare the details on the All Trading Up To Report with the sum of all filed returns and calculate the outstanding output and input tax amounts that will be due and retain the information.
- Switch the VAT scheme on the system to the Standard scheme and process things as normal
- When accepting the current period return adjust the second column of the VAT100 with the outstanding VAT amounts calculated above
- Store all reports
Confirm the final Cash Accounting period
For example, if the final cash accounting period is to be the 31 December 2017 then any adjustments will need to be made normally when filing the return for the next VAT period 31 March 2018.
Process all outstanding transactions
Bring the period up to date by entering all outstanding items.
Accept the VAT Return
Accept and file the VAT100 return in the usual way, for example the 31 December 2017 period.
Run the All Trading Up To Report
The report is found under the VAT menu
HMRC - Reports - VAT Transactions - tick All Trading Up To
The report provides the details of all VAT transactions by VAT period that have been entered on the system on the Standard Scheme basis up to the date selected. The totals therefore represent the total VAT due.
Note the grand totals for VAT amount and Net Amount for outputs and inputs. Also note the totals for VAT amount and Net Amount for outputs and inputs for the current period.
It is suggested to use a spreadsheet to note these figures as in the example below.
Run the extract report for the details of all previously filed VAT returns on the system
The extract is found under the HMRC menu
HMRC - Reports - View Saved VAT Returns Reports - Click the CSV button at top left
A file is downloaded that may be opened in Excel. Sum the totals for columns BOX*_FILED columns, not the BOX*_CALC columns
Note these figures and enter them into the spreadsheet above
Compare the details on the All Trading Up To Report with the sum of all filed returns
Calculate the outstanding output and input tax amounts that will be due and retain the information. The output Side and Input Side adjustments represent the amounts of VAT that is outstanding from all closed VAT periods on the system.
Transactions that are dated in the current (open) vat period will change to the standard basis when the scheme is amended.
Switch the VAT scheme to Standard
On the VAT Configuration menu, change the scheme to Standard
HMRC - Configure VAT - VAT Scheme - Select Standard Scheme - SUBMIT
Transactions dated in the current (open) period will be picked up automatically so it is only those outstanding transactions for closed periods for which adjustment is necessary.
Closing the new Standard Accounting Period
Navigate to the VAT100 return as usual but before accepting amend column 2 with the adjustment amounts from the spreadsheet above. Then accept and file as normal.
Store all reports
Store all reports for future reference.