VAT registered and using cash accounting but not the Flat Rate scheme

As you use the cash accounting scheme, you account for both input and output VAT according to the date that you receive and pay the money.

For the first few months of 2011 you will be receiving money in respect of sales invoices issued before 4th January 2011 and as you enter each receipt into your records you will need to check whether the original invoice charged VAT at 17.5% or 20%. If the original invoice was at 17.5% you should account for VAT on the receipt at 17.5% notwithstanding the fact that you receive this money after 4 January 2011.

On the payment side, you may well settle purchase invoices dated before 4 January 2011 after that date. You are only entitled to reclaim input VAT at the rate showing on the original invoice, i.e. 17.5%, even though you settle it after 4th January.

For the first few months of 2011 you therefore need to check very carefully the dates and VAT rates applying to the entries on your VAT returns.