I've always worked for VAT registered companies, some part exempt.
However, if a company is below the VAT registered threshold and therefore not registered for VAT how do you record input VAT on bookkeeping software like Sage.
Do you put the gross figure in the net box and use "T9" or "T0", or
Do you still treat it the same with the correct net and VAT amounts and have an Unrecoverable VAT figure in the accounts?
Regards
GMC
Replies (7)
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You can do it either way. It
You can do it either way. It's up to you. If you wanted to capture information about the amount of input tax the business would be able to recover if it was VAT registered, and you thought the extra time and effort involved was worth it, you would use the second method. I suppose if you though the business was going to expand so that it would register for VAT in future it would perhaps be advisable to start as you mean to go on by recording all input VAT from day one.
Careful on your first return
Be careful on your first return (assuming you register in due course) that you do not pick up pre-registration input vat to which you are not entitled.
Of course there may well be some vat that you can claim, such as stores on hand etc.
One question John
How would you show the balance in the purchase tax control account in the year end accounts as you haven't been able to claim the vat back yet?
It would go to the P& L
It would go to the P& L account as an expense - irrecoverable VAT.
What a nightmare if some VAT was claimed on a purchase to which a private use adjustment was to be made.
Keep it simple and record all transactions gross. T9 them just in case your company registers in the future so that they do not appear on the first VAT return as mentioned above by Tom.
Also, what about the VAT on fixed asset purchases - your CA claim would be wrong doing it that way..
I agree
What a nightmare if some VAT was claimed on a purchase to which a private use adjustment was to be made.
Keep it simple and record all transactions gross. T9 them just in case your company registers in the future so that they do not appear on the first VAT return as mentioned above by Tom.
Also, what about the VAT on fixed asset purchases - your CA claim would be wrong doing it that way..
It also applies to stock or work in progress. And what about output tax? You need to track turnover gross to monitor against the threshhold.
I think there's no right answer but Triggle's is better.