What is invoice accounting for VAT?
Definition of invoice accounting for VAT
Invoice accounting is the standard way to add up your VAT for your VAT return. It means that you will pay VAT to HMRC when you've invoiced your customers, regardless of when your customers pay you.
When you are invoice accounting for VAT, you may have to pay HMRC the VAT on your invoices before your customers have paid you. Conversely, you may be able to reclaim the VAT on your bills before you pay your suppliers.
Example of invoice accounting for VAT
A business prepares VAT returns to the quarters ending 31st March, 30th June, 30th September and 31st December.
The business is invoice accounting for VAT and it issues an invoice dated 1st March, which the customer pays for on 1st April. This invoice will go on the VAT return to 31st March, because that is the quarter in which the invoice was dated.