Changing VAT schemes - VAT Cash Accounting to Standard VAT UK only

If you have entered transactions before switching VAT schemes, you can use two methods to ensure correct VAT calculation under the Standard scheme

Option 1;

1. Take a backup.
2. Delete the transactions entered in the new VAT period.
3. Reprocess them after changing your VAT scheme according to the steps below.

Option 2;

1. Take a backup.
2. Restore the last backup made before you entered the transactions.
3. Reprocess them after changing your VAT scheme according to the steps below.

 CAUTION: When restoring a backup, check that the previous VAT period has been VAT reconciled and the values are the same before changing the VAT scheme. 

1. Take a backup of your data and label it 'Before changing to the Standard VAT scheme'.
2. Calculate and reconcile, and complete the VAT Return for your final VAT Cash Accounting scheme period, including posting the VAT Transfer.
3. To reconcile VAT, go to VAT > VAT Return and calculate it up to your VAT Cash Accounting period end.
4. To access the saved VAT Returns after switching schemes, make an archive of your data.

You're now ready to change to the Standard VAT scheme.

1. Click Settings, click Company Preferences and then click VAT.
2. From the VAT Scheme drop-down list, choose Standard VAT.

 NOTE: You can't amend this setting if transactions on the audit trail haven't been VAT reconciled 

3. A warning prompts you to check your recurring entries before processing them. To continue, click OK, then click OK.

After posting VAT journals, clear any remaining balances on the Sales and Purchase Tax Control Accounts in your next VAT Return. For more information, refer to the section on accounting for any outstanding invoices on your next VAT Return.

NOTE: In certain circumstances, it's possible to defer the payment of VAT after switching schemes. For further advice about this, refer to HMRC and your accountant.

Outstanding invoices from the Cash Accounting scheme won’t appear in the VAT Return after switching schemes. You can include these invoices on the next VAT Return.

Allocating a Cash Accounting payment to a Standard VAT invoice causes VAT to be calculated twice, once on the payment, once on the invoice.

The four reports below show you any outstanding invoices and the net and VAT split, and reports that list the outstanding payments on account.

Run these reports at the point of switching VAT schemes, and then keep a copy of the reports. Once you switch to Standard VAT, you can't use these reports—new transactions in the same date range are also included.

You can download and restore the VAT reports using this guide.

If outstanding invoices are entered on the VAT Cash Accounting scheme, you can adjust the figures in boxes 1, 4, 6 and 7 to include the figures from these reports. If an invoice that's allocated to a payment on account is entered on the VAT Cash Accounting scheme, you can adjust the figures in boxes 1, 4, 6, and 7 to include the invoice value that's allocated to the payment on account.

1. Click VAT, then click VAT Return.
2. Enter the relevant dates, then click Calculate VAT Return.
3. Click Make adjustments and enter the following adjustments:
   

   Box	Adjustment
   Box 1	Add the total VAT value from the SL_VCA.report minus the total VAT value of any invoices allocated to the payments on account shown on the SA_VCA.report.  NOTE: If the VAT figure is negative on the second report, add it to the result from the first report.
   Box 4	Add the total VAT value from the PL_VCA.report minus the total VAT value of any invoices allocated to the payments on account shown on the PA_VCA.report.
   Box 6	Add the total Net value from the SL_VCA.report minus the total Net value of any invoices allocated to the payments on account shown on the SA_VCA.report.
   Box 7	Add the total Net value from the PL_VCA.report minus the total Net value of any invoices allocated to the payments on account shown on the PA_VCA.report.

4. Make a note of the new values in Boxes 1 and 4.
5. Click Reconcile VAT Return.
6. When you run the VAT Transfer, you must include the adjustment values:
   • Under the Sales tax amount, enter the value you noted for Box 1 in step 4
   • Under Purchase tax amount, enter the value you noted for Box 4 in step 4
7. You must now journal the VAT values entered in step 6, from the Manual Adjustments nominal code, into the VAT liability.
   • Click Nominal codes, and click Journal entry

   If the value on the Manual Adjustments nominal code is a credit balance, post the following journal:

   N/C	Name	Details	T/C	Debit	Credit
   2204	Manual Adjustments	Switching VAT schemes	T9	Difference between the total adjustment value from boxes 1 and 4.
   2202	VAT Liability	Switching VAT schemes	T9		Difference between the total adjustment value from boxes 1 and 4.

   If the value on the Manual Adjustments nominal code is a debit balance post the following journal:
   

   N/C	Name	Details	T/C	Debit	Credit
   2204	Manual Adjustments	Switching VAT schemes	T9		Difference between the total adjustment value from boxes 1 and 4.
   2202	VAT Liability	Switching VAT schemes	T9	Difference between the total adjustment value from boxes 1 and 4.

The following issues can cause differences between VAT reconciliation reports and VAT control account balances;

• If you use the Write Off, Refunds and Returns Wizard feature, the VAT isn't removed from the relevant VAT control account, but one or more invoices are then marked as fully paid. Therefore the VAT is included on the VAT control account, but one or more invoices don't appear on the VAT reconciliation reports
• If you've posted any sales or purchase transactions with a T9 tax code, but still entered a value into the VAT amount
• If VAT journals are posted incorrectly, previous period liabilities will remain uncleared