Switching VAT from Accural to Cash

Hello, I am trying to switch from accrual to cash accounting. When I produce a report the figures are incorrect. I have read other posts but I can’t work this out. Can you please advise the easiest way to resolve this.

Thank you

You cannot use cash accounting if you are not up-to-date on your VAT Returns and VAT payments.
You can start using the Cash Accounting Scheme:

  • at the beginning of any VAT period if you are already registered for VAT
  • from the day your VAT registration starts if you are not already registered

If you are already registered for VAT when you start using cash accounting, you must make sure that you do not account for VAT twice on any sales or purchases. You must identify and separate any transactions in your records that you have already accounted for using standard VAT accounting.

When you’re on accrual accounting Quick File calculates your VAT directly from the invoices on the system. When a VAT return has been filed it will then put a mark against these invoices so they are disregarded in future returns. On cash the markers are applied to the payments made against the invoices. If you’ve filed several months of VAT returns on accrual there will be no markers on any payments, so when you switch and run your first cash return it will pull all payments in as far back as the start date you have configured in your VAT settings.

What you would need to do is move the start date forward to the beginning of your first cash return, this will ensure that all previous payments before that date are ignored (it behaves like a sort of wall to prevent old transactions getting sucked in). This however does not guarantee your return will be correct as you would need to adjust out any difference for those invoices that were included on a previous return and paid in the new return period.

I would also check with HMRC to ensure you are permitted to use the cash method. I believe they will be expecting you to file either cash or accrual and you can’t switch without them know what method you’re using.

There is not need to apply or get permission from HMRC as such, you just need to be consistent and not switch in middle of vat return period.

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Also if you are on flat rate scheme you wont be able to use cash basis anyway. Flat rate has its own cashed BASED turnover method.

Who cannot use the Cash Accounting Scheme

You cannot use cash accounting if:

you are not up-to-date on your VAT Returns and VAT payments
you have been convicted of a VAT offence or charged a penalty for VAT evasion in the last year
your VAT taxable turnover is over £1.35 million per year

When you must not use cash accounting

Even if you use cash accounting, you must still account for VAT using standard VAT accounting when you:

buy or sell goods using lease purchase, hire purchase, conditional sale or credit sale
import goods or acquire goods from other EU states
remove goods from a Customs warehouse or free zone
issue a VAT invoice that isn't due to be paid for six months or more
issue a VAT invoice in advance of providing goods or services

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