UK VAT and non payment

[Maf. King]

On Tuesday 18 August 2009 16:17:10 Berni Elbourn wrote:
> I am new to this and I have tried to follow the scattered VAT advice here.
>
> I think I understand (or possibly not) the methods so far.
>
> I have a big concern that UK VAT is paid within the month of a quarterly
> return. This is such a short time that for a small business there is a
> risk of paying VAT on unpaid invoices.
>
> I can see one way to get round this by using some kind of VAT receivable
> sub account of accounts receivable etc.  Sorry but I can not see how the
> built in invoicing and payment received process can use these.
>
> ...
>
> So is there a way to set-up GNUcash transactions so that the actual VAT
> due account is updated only when a customer has actually paid please?
>
> Thanks,
>
> Berni
>

Hi Berni,

Well, that depends!  VAT is normally calculated on what is known as  "accruals 
basis" - the Tax Date of the invoice is the date which counts, not the date 
you *actually* get the cash!

It is possible that you can agree to use a "cash basis" with HMRC, but then 
you don't (officially) have credit terms to worry about, and the GC 
invoice/bills stuff doesn't really apply, you just use the "normal" register 
entries from (eg.) income:whatever->assets:somebank, when the cheque arrives.

As a counter point, if you get bills from your supplier and you are on 
accruals, at least you get to play the system that way too, and possibly 
reclaim VAT you haven't actually paid out yet.... small comfort, I know!

HTH,
Maf.