Module 221 min2465 wordsFree — no account
The annual VAT return and the option for cash accounting
The module’s worked examples, then cases to attempt before revealing their solution · 2 sections · 371 words · 3 min
Worked example
One invoice, two quarters
A wholesaler under cash accounting delivers and invoices goods on 15 February for 20,000 € plus 4,400 € of VAT to a business customer, which pays on 10 May. In the first-quarter return the taxable amount of 20,000 € goes on line VP2, but line VP4 does not include the 4,400 €. The tax becomes chargeable in May and goes on line VP4 of the second quarter, together with the corresponding payment.
Practical case
The first half-year of a cash-accounting wholesaler
A wholesaler that settles VAT quarterly under the ordinary rules has opted for cash accounting. On 10 March it delivers and invoices goods to two business customers: invoice A for 10,000 € plus 2,200 € of VAT, paid on 15 May; invoice B for 5,000 € plus 1,100 € of VAT, still unpaid at year end, with no insolvency proceedings against the customer. In February it received a purchase invoice for 3,000 € plus 660 € of VAT, which it pays to the supplier on 20 April. How much VAT does it settle in the first and second quarters, before any 1 % surcharge, and what happens to the VAT on invoice B?
Hint: For each invoice ask in which quarter the collection or the payment happens, and remember the one-year limit from the transaction.
Show the solution
First quarter: no invoice has been collected and the purchase has not yet been paid, so chargeable VAT is zero and deductible VAT is zero; the settlement is nil, even though the taxable amounts of 15,000 € and 3,000 € appear on lines VP2 and VP3 of the return. Second quarter: invoice A is collected on 15 May, so 2,200 € become chargeable; the purchase is paid on 20 April, so 660 € become deductible; the balance is 2,200 − 660 = 1,540 €, to which an ordinary quarterly filer then adds 1 % interest. Invoice B is not collected: its tax of 1,100 € becomes chargeable in any case one year after the transaction, that is on 10 March of the following year, and enters that quarter's settlement.
Answer: Nothing in the first quarter, 1,540 € in the second; the 1,100 € on invoice B become chargeable on 10 March of the following year
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