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HMRC internal manual

VAT Cash Accounting Scheme Manual

Cash accounting scheme: Records and accounts: Client accounts

A solicitor or an accountant may hold a “client account” on behalf of their customer and either they or their customer may be using the cash accounting scheme.

If a cash accounting business pays monies into a client account so the funds in that account remain the property of the cash accounting business, the cash accounting business may only recover input tax on the date that the solicitor / accountant debits the client account to pay for services provided. They cannot reclaim input tax on the date that they pay the money into the client account.

If the solicitor / accountant is using the Cash Accounting scheme, they must account for output tax on the date that they withdraw money from their client’s account.