Is cash accounting for VAT supported in iplicit?

This article covers cash accounting for VAT and explains why iplicit does not support it, plus the Deferred VAT on Proforma Invoices alternative approach that achieves the same result.

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Does iplicit support Cash Accounting for VAT?

No. iplicit does not support Cash Accounting for VAT – accounting for VAT only when payment is received or made. 

You can achieve the same cash basis effect using a different approach called Deferred VAT on Proforma Invoices, which accounts for VAT only when payment is received. The rest of this article explains the setup.

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Setting up Deferred VAT on Proforma Invoices

This approach uses Proforma Invoices, Deferred Tax and a dedicated Deferred VAT account to hold VAT until payment is received, instead of reporting it at the point of invoicing.

1. Open the document type settings for your Proforma Invoice document type and enable the 'Deferred Tax' option. This allows VAT to be deferred until payment is made
2. Create a Deferred VAT General Ledger code, set up as a Balance Sheet account so it can hold the deferred VAT amounts
3. Go to Account Defaults and link the new Deferred VAT code. This tells iplicit to use the Deferred VAT code instead of the standard VAT code whenever a Proforma Invoice with Deferred Tax enabled is created.

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How VAT is recorded on a Deferred VAT Proforma Invoice

When you create a Proforma Invoice with Deferred Tax enabled, iplicit posts the VAT to the Deferred VAT account rather than the standard VAT account. At this stage:

• iplicit does not include the VAT in the VAT return
• The General Ledger entry debits Deferred VAT, holding the VAT until payment is received.

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What happens when the Proforma Invoice is paid?

Once the Proforma Invoice is paid, iplicit moves the VAT from the Deferred VAT account into the VAT return.

• The General Ledger entry credits Deferred VAT and debits VAT Input
• iplicit now includes the VAT in the VAT return, matching the cash basis principle of accounting for VAT only when payment is received.

Feature support summary