How do I set the VAT option in Time & Fees and what do they mean?
Article ID
ias-1687
Article Name
How do I set the VAT option in Time & Fees and what do they mean?
Created Date
14th September 2004
Product
IRIS Time and Fees
Problem
How do I set the VAT option in Time & Fees and what do they mean?
Resolution
Contents
Introduction
Options
Differences
Setting the correct Options
Introduction
This Knowledge Base article will explain the different VAT options that are available in Fees.
NOTE: It is important that you set your VAT option correctly before you start posting in Fees. Otherwise your VAT may not be calculated correctly
Options
VAT can be treated in 3 different ways in Fees: normal invoicing, proforma and low turnover firm (for VAT purposes). To set these options:
To set these options in Fees:
Log into the Fees Ledger as master
Click on Options and select Fees Ledger
Your VAT options will be displayed in the options tab:
a. Low turnover firm (for VAT purposes), or
b. Not low turnover firm, but invoices are normally “Proforma”
If the above options are unticked ‘Low turnover firm (for VAT purposes)’ and ‘Not low turnover firm, but ‘invoices are normally proforma’, then you will be normal invoicing. Details of normal invoicing, proforma or low turnover firms are described below.
Normal invoice:
The practice is liable for VAT as soon as the invoice is raised. For example, an invoice is raised on the 1st of January for £1000 with £15% VAT, (to give a total value of £1150). The practice is now liable (to pay the taxman) £150 on his next VAT return.
Low turnover firm:
This is a form of cash accounting, where the low turnover firm setting can be used by a practice whose turnover is below a certain threshold. This is intended to help small businesses with cash flow problems caused by late payment of bills by clients.
For example, an invoice is sent to a client on the 1st of January. At this point the VAT is not liable and the ‘pending’ VAT element is stored in the Fees nominal code ‘VAT reserve’. The receipt is received late on the 20th February for £1150, and matched to the invoice. On the 20th February the practice is liable for the VAT of £150 (When the receipt is matched, the ‘pending’ VAT liability is automatically transferred from the VAT reserve to the VAT Output nominal code)
Related Articles
KB IAS-11914 : How do I process a receipt if I am Cash Accounting a low turnover firm?
Not a low turnover firm, but invoices are posted as Proforma:
This is a method of cash accounting, where a proforma invoice is sent, rather than a real invoice. A proforma invoice (also known as a payment request note) can look similar to a normal invoice except that it formally states it is not a VAT document.
For example, a proforma invoice is sent to a client on the 1st of January for £1000 with £150 VAT to give a total of £1150. At this point the practice is not liable for VAT. This is recorded within the Fees Ledger within the VAT reserve account, to give a total of VAT that has not been accounted for. A receipt is received on the 20th January for £1150. Once this is matched to the invoice the practice is accountable for the VAT value of £150 (thus the VAT value is transferred from pending (VAT reserve) to the real (VAT output nominal code).
Differences
Cash accounting: Differences between low turnover and Proforma:
You can only set the low turnover firm option if your practice has a low turnover!
A proforma invoice is not an invoice and technically not a debt. As it is not a tax document / can never have a VAT liability, it is technically not a debt. Within the Fees nominal codes this is treated by adding proforma’s to the debtors reserve rather than the debtors’ control.
Setting the correct option
How to change the relevant options:
Log on to IRIS fees from the IRIS Main Menu as Master
Click on Options | Fees Ledger
In the General tab, under the General Options section, the options will be available.
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