Hi Community,

If you're a smaller business, you may not need to pay VAT until your customer actually pays you. That's exactly what the Payment/Cash Based VAT setting in Sage 50cloud Pastel Accounting does.

How it works

Normally, VAT becomes due as soon as you raise an invoice. With Cash Based VAT, the tax only becomes due (or claimable) once money actually changes hands:

• When you invoice a customer, the VAT sits in a holding account (your Tax Provision Account)
• Once your customer pays, the VAT moves across to your Tax Control Account
• Same goes for supplier invoices — the tax credit only kicks in once you've paid them

Where to set it up

Go to Setup then Tax then General Settings, and choose your tax system:

• Do Not Use Tax — for businesses exempt from tax processing
• Normal VAT/Sales Tax — the standard option most businesses use
• Payment/Cash Based VAT — tax only applies when payment happens

One thing to watch: if you use open item processing, make sure you allocate your payments and receipts to the right invoices — unallocated transactions can leave you behind on your tax reporting.

 Full guide with screenshots: How does the payment Cash based VAT system work?

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Nteboheleng William Madibo

Sage Country Community Lead AME