Summary
Description
There may be a time when you need to change VAT schemes.
For example: You’ve reached a turnover threshold. Or a different scheme would be more beneficial to your business.
The following VAT schemes are available in Accounting:
- Not Registered – VAT options aren’t available when entering transactions. No VAT calculates
- Invoice Basis – VAT calculates on invoices and credits issued and received
- Cash Basis – VAT calculates on payments and receipts
For more information please read our help guide.
CAUTION: We recommend changing VAT schemes at the start of a new accounting period. Do this after you’ve produced your final VAT Return for the previous scheme. Don't enter any transactions on the new scheme until you’ve ran the return and changed your scheme. This ensures correct accounting for VAT.
Resolution
Preparing to change your VAT scheme
Before you change your VAT scheme you must:
- Ensure you’ve entered all transactions up to the end of the final period for which you’re using the current VAT scheme
- Allocate any outstanding payments on account. If you can’t allocate the payment on account, it hasn’t been bank reconciled. If it has been bank reconciled, you can delete the payment. Enter it again after you’ve changed schemes. If the payment on account has been bank reconciled, refund the payment on account. Change your scheme and then enter it again
CAUTION: You may use the Cash Basis VAT Scheme when you issue the refund. Both the payment on account and the refund are in the final VAT Return. To ensure the VAT Return is correct, you must manually adjust it to remove the values of the refund.
- Produce your final VAT Return for the current VAT scheme. If you have a draft VAT Return, you can’t change VAT schemes, you must complete the draft return
CAUTION: You may need to allocate payments on account to outstanding invoices. You must run the VAT Return up to the allocation date. You can check the allocation date. Do this within the Activity tab of the relevant customer or supplier record.
Future dated transactions
If you’ve any future dated transactions that haven’t been VAT reconciled, you can’t change your VAT scheme.
Solution:
- Wait until after these transactions are in a VAT Return
- Change your VAT scheme from the next period
Alternatively:
- Delete or void the transactions
- Change your VAT scheme
- Enter the transactions again under the new scheme
If you’ve any future bank reconciled transactions, you can’t delete these.
You must:
- Include any appropriate bank transactions on a VAT Return
- Wait until after the date of the last transaction or VAT Return, whichever is later
- Change your VAT scheme
Not registered for VAT
Are you not registered for VAT and changing to another scheme? Any transactions you entered before changing the VAT scheme aren’t in your VAT Return. Perhaps they should be. For example: because you didn’t choose your scheme before entering them. You should void or delete the transactions. You can then change the VAT scheme and enter them again choosing the correct VAT rate. When you run your first VAT Return, it includes the relevant transactions.
To change your VAT scheme
CAUTION: Before following these steps, ensure you’ve completed the Preparing to change your VAT scheme section.
- Go to the Settings, then Business Settings tab. In the Financial Settings section, select Accounting Dates & VAT.
- Under VAT Details, enter the following information:
| VAT Scheme | Choose your new VAT scheme. |
| Submission Frequency | You must submit your return to Revenue bi-monthly. |
| VAT Number | Enter your VAT number. |
- Select Save.
You’ve successfully changed your VAT scheme. The next time you produce a VAT Return, it includes the relevant transactions for the new scheme.
TIP: You may have changed to the Cash Basis VAT Scheme. You may have outstanding invoices or credit notes entered on the previous scheme. When you record these as paid or refunded, you have already accounted for VAT. Therefore, no VAT now calculates.
Messages received when changing schemes
You must submit a VAT Return before changing tax scheme
You haven’t yet submitted your final VAT Return for the current VAT scheme. Select Cancel then submit your final VAT Return before trying to change the VAT scheme again.
Before changing tax scheme you must void any future dated transactions
You’ve VATable transactions dated in the future. If these transactions haven’t yet been VAT reconciled, you can delete or void them. Change VAT scheme and enter them again. If they’ve already been on a VAT Return, wait until after the date of the last transaction. Only then change schemes.
TIP: To help identify future dated transactions, run the Nominal Activity Report. When running this report, to ensure it includes all transactions, enter a To date in the future. For example, one year from now.
You can’t change scheme until you’ve allocated outstanding payments on account and then ran a VAT return to pick up these allocations
You’ve outstanding payments on account which you must allocate. You must do this before you can change schemes.
When you allocate payments on account to an invoice, it creates either:
- A customer allocation transaction
- A supplier allocation transaction
The VAT Return won't include any transactions you entered before changing the VAT scheme. However, you must still reconcile the VAT return. To do this you need to run a final VAT Return up to the date of the allocation. Check the allocation date within the Activity tab of the relevant customer or supplier record.
If you can’t allocate the outstanding payment on account:
- Not registered, Standard VAT or Flat Rate Invoice Based – Provided it hasn’t been bank reconciled, delete the payment on account. Enter it again after you’ve changed schemes. Alternatively, if the payment on account has been bank reconciled, you can refund the payment on account. Change your scheme, then enter it again
- VAT or Flat Rate Invoice Based – If you’ve VAT reconciled the payment on account, you can’t delete it. You should wait until you can allocate the payment to an invoice. If you’re unable to wait, you can still refund the payment on account. However, you must then produce a final VAT Return for this. Manually adjust the return to remove the values of the refund
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