Accounting for VAT when not VAT registered

Hi there quick file

i have been tracking vat so when i needed to i could register if was close to thresh hold but now realise i have a purchase vat control account as if i am due a refund as an assett an in reality i dont have to do a return. Do you have any suggestions how to tackle this?

You shouldn’t have the VAT registration feature switched on unless you’re actually VAT registered, pretty much for this very reason. VAT is treated as an asset/liability (accrued in the purchase tax and sales tax control accounts) so if you make a purchase of £120 it will post £20 to the purchase tax control account.

There are a couple of ways you can solve this, you can either journal all the VAT out of the purchase tax control account to something like general purchase (or an assortment of purchase nominal ledgers).

The other option is to manually edit all the invoices and switch to 0% VAT. You don’t have a crazy number of purchases in there so personally I’d go with this option.

Once you’ve done that I would suggest switching off VAT Accounting in Account Settings >> Company Settings.

Hope that helps!

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