Hi, I understand that under the cash accounting scheme for VAT you do not pay nor reclaim VAT until you have been paid by debtors or you have paid your creditors.
The VAT would still be shown on the BS as a liability but then if the debtors didn't pay you and you didn't pay the creditors would the liability just be reversed off the balance sheet?
I am just trying to learn about other VAT schemes. My next one I am going to read up on is Flat rate scheme so there could be more questions.
Although you are doing the VAT return on a cash basis you are still doing your accounts on an accruals basis so there will be different between the VAT liability on the VAT return and that on the accounts accounted for the additional VAT on year end debtors less VAT on year end creditor.
If a debtor doesnt pay then the VAT on the sale never hits the VAT return and you just write off the bad debt in the accounts as normal
