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How do I record VAT offset from previous years in company accounts?

How do I record VAT offset from previous years...

I am having an issue with our accounts as a result of starting to pay VAT. In the first two years of accounts we weren't paying VAT. Expenses were shown as the full amount we had paid (including VAT).

The problem comes in year three, as six months in we become VAT registered. Why the problem? Well technicaly VAT should not be showing on our P/L. So we are showing sales and expenses without VAT. The results of this should be correct as it should mirror the amount of VAT actually paid (i.e. VAT on inputs - VAT on outputs). However, the problem is that this does not take account of all the offsetting we were able to do from previous years.

In the end the offsetting from previous years was something like £8,000. How do I reflect this in the accounts? Do I show HMRC as a debtor in the previous years? I'm not sure what the normal practice would be here.

I would be so grateful for your help. Thank you


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28th Jun 2012 12:03


Do you mean claiming pre-registration input VAT?

If so, you need to credit the P&L or B/S account to which the gross amount was posted and debit the VAT control account with the VAT now being claimed.  Where you are recovering VAT on fixed asset additions within the last 3 years, you will also need to adjust the depreciation charged.

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By vwvw123
28th Jun 2012 13:22

Yes that's it.

When you say:

"you need to credit the P&L or B/S account to which the gross amount was posted"

Does this mean we need to go back to years 1 and 2 and credit the accounts with the VAT which has now been reclaimed?

Thank you



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28th Jun 2012 14:08

No going back

You need to go back to the accounting records for Years 1 & 2 only to establish which accounts the items were posted to, but you process the journals in Year 3, the year in which you registered for VAT and reclaimed the pre-registration input VAT.

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