What is the correct way of calculating input tax for a vendor registered on the payment basis?
According to the VAT Vendor Guide the following applies:
There seems to be different opinions about this, but my logic tells me that when you issue a cheque it serves as a payment, so you include it in your calculation for input tax regardless of whether the cheque has been presented for payment or not. But some people reckon you only include it in your input tax calculation when the cheque is physically through the bank. Which one is the correct way of calculating the input tax?Payments basis – Add up all the valid tax invoices during the period which have been paid in full and invoices that were partly paid only limited to the extent of payment made. Thereafter apply the tax fraction (that is, 14/114) to this amount to obtain the deductible input tax.