My Company provides residential properties for rent. This rental income is not subject to VAT so it is unable to reclaim VAT on goods and services that are purchased in the normal line of business. Mistakenly, a VAT Registration was made when the Company was formed and VAT was initially reclaimed. This has now been corrected, the Company de-registered and HMRC fully recompensed!!
However, Sales and Purchase Tax Accounts balances still appear in the Balance Sheet thus giving an inflated and incorrect position and any advice as to how this can be corrected will be very welcome.
Hello @RJBIL
This would be a question for your accountant, as they can give you adjustments to process co correct this.
Please be aware that the support team are not registered accountants nor bookkeepers and professional advice should be sought for queries such as this.
You need to to journals to reverse the effect,
-
for out put vat on income
Dr Vat
Cr Rental income -
for input vat
Dr relevant expenses categories
Cr Input vat a/c
vat liability account should have been settled when you sorted things with HMRC
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