I read an earlier forum entry about this topic and concluded that QuickFile has no way of entering the missing half of VAT so that the Purchase ledger is correct? I introduced a new VAT rate of 10% to get the VAT amount correct, but then found I couldn’t find a way of getting the ineligible portion of VAT entered. Am I missing something?
If you are leasing a car and are eligible to reclaim only 50% of the VAT, you don’t necessarily need to enter a 10% rate. You can simply override the VAT amount being reclaimed.
The ineligible part of the VAT you simply ignore. Input VAT sits as an asset on your balance sheet so you don’t want that appearing on your accounts.
You should however still retain a copy of the original VAT receipt and attach it to the purchase. That way you still have a record of the original VAT amounts.
Thanks for that, but that leaves an incomplete Purchase Invoice - how do you show it paid when the amount paid is greater than the invoice value?
The above is on the assumption that the car hire firm is invoicing you in full, but you are then only reclaiming 50% of the input VAT. What exactly is stated on the invoice your supplier issues you in terms of the NET and VAT amounts?
Yes the Car hire firm invoices at 20% VAT but states at the bottom of the invoice I can only claim half of the VAT, so I assumed that if I entered the Purchase invoice with half the VAT that would sort the VAT return out. Does this mean I should enter the full 20% Vat and make a note of adjustments to the VAT return?
Let’s say the car hire company invoice you £120 (£100 + vat), so £120 is paid in full.
The VAT on the invoice will be £20, although you will only be entitled to reclaim £10. So you would key in your purchase as per the screenshot I posted earlier:
Here you have the gross amount as £120 and a vat amount of £10, so just £10 is reclaimed on your VAT return but the gross total is still correct.
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So the other half becomes part of the expense in your P&L rather than going on your balance sheet as an asset. It’s the same principle as when you’re not VAT registered - you can’t claim the VAT back at all so you enter the whole VAT-inclusive total when you create the purchase record on QuickFile.
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OK understand now. - thanks.
I’d personally break it down as
- Lease (VAT claimable): net £175.28 @ 20% VAT (£35.06) = total £210.34
- Lease (VAT not claimable): net £175.27 @ 0% VAT = total £175.27
- non-claimable VAT: net £35.05 @ 0% VAT
so it’s perfectly clear that it’s a 50/50 split of the net. But what you’ve done to manually adjust the 20% VAT down to 10% and then add back a 0% line just for the VAT - that certainly works, I hadn’t thought about it that way back when this was originally posted.
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Yes your method makes sense as it describes what is actually being done. Thanks a lot for responding to such an old topic.
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It’s exactly the same as if you had two items on an invoice at different rates of VAT - you have to show the correct net and VAT for the total at each rate. So one line of net £175.25 at 20%, VAT £35.06 as described by @ian_roberts . Then a separate line for net £210.34 at 0%, which is the part you cannot reclaim, same as if it was a non-VAT-registered supplier, or if it was something like business entertaining.