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Q. My company uses the cash accounting scheme. We've lost a lot of trade due to Brexit and Covid-19 and to make back some income we're planning to sublet part of our warehouse. We have elected to tax this. We want to raise a single invoice at the end of each financial year (31 March) for the year ahead. However, we're happy for our tenant to pay the rent and VAT in monthly instalments. Is this permissible under the cash accounting scheme?

A: Under the scheme, in the case where an invoice is raised in advance of a supply the transaction is excluded from the scheme. This means you would need to account for VAT based on the sales invoice date, not the date your tenant pays you, which is clearly a cash flow disadvantage.

If you’d prefer not to issue monthly invoices, you could issue a "request for payment" at the start of the year instead of a VAT invoice. This wouldn't create a tax point. You may also wish to issue an advance sales invoice showing twelve monthly tax points coinciding with the requested payment dates.

About the Author

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Martin Johnson

Partner
With expertise in advising family-owned companies on a range of tax, accountancy and business issues, Martin also has an in-depth knowledge of the automotive and property sectors. In addition, he provides advice on inheritance tax planning and wealth management to owner-managed businesses.  Martin leads the firm in developing its expertise in the buy-to-let sector, advising both residential and commercial property owners on relevant tax and legislation issues.   A further element to Martin’s role is to build Torgersens’ relationships with banks, financial advisors and specialists in commercial and employment law to ensure that the firm’s clients have access to market-leading guidance.  

To get in touch please e-mail martin.johnson@torgersens.com.

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