INPUT VAT – This is where all of the VAT from your Purchases is stored. When a purchase receipt is created, then the VAT from this receipt is moved to the Input VAT code.
OUTPUT VAT – This is where all of the VAT from your invoices is stored. When a sales invoice is created, then the VAT for this invoice is moved to the Output VAT code.
VAT Control – When you run a VAT return within your account, the balances from the Input VAT code and the Output VAT code is moved to the VAT Control code to work out your VAT liability. If you are on normal accrual accounting then it will be as simple as taking what you owe (The amount from the Output VAT code) and deducting what is owed to you (The amount from the Input VAT code) to determine your VAT liability.
If you are on Cash accounting, and you run the VAT report then KashFlow only moves the VAT from your paid invoices/purchases to the VAT Control account to determine your VAT liability.
Supported VAT schemes within KashFlow
Cash Accounting – Some businesses use a VAT scheme called “Cash Accounting”. This allows you to only pay/reclaim VAT on payments actually made/received – as opposed to invoices issued. This is usually very useful for small businesses.
Accrual Accounting – Accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged. The term “accrual” refers to any individual entry recording revenue or expense in the absence of a cash transaction
The Flat Rate Scheme – The Flat Rate Scheme lets you pay VAT to HMRC as a set percentage of your turnover, lower than you would normally pay. However, you can’t reclaim VAT on any of your purchases. The exact percentage depends on the industry you are in. If you think you may benefit from this scheme you should talk to your accountant. To choose whether you wish your VAT to be calculated by the CAS or FRS simply go to the REPORTS tab, select TAX report and select VAT MANAGEMENT & REPORTS SETTINGS and select VAT SETTINGS from the top right-hand corner of your screen (vat settings will appear automatically if it is the first time you have accessed this page). If you wish for the VAT to be shown on your overview page, simply tick the ‘no more nasty surprises’ box (note: this will cause the overview page to load a little slower). Select update once you are finished.