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How do I record VAT on my purchases if I’m not VAT registered?


#1

The simple answer is you don’t. Here’s why…

When you’re VAT registered you may be entitled to reclaim the VAT on your purchases that are made with other VAT registered suppliers. You will see this on the invoice and will need this to support your claim. The VAT amount needs to be itemised on your accounts and it will accumulate as an asset on the balance sheet, after all you want to be able to track how much money you can reclaim later. Until it’s reclaimed, it’s an asset.

When you are not VAT registered, you should always be recording the gross value of the purchase (including the VAT), so if a supplier invoices you £100 NET + £20 VAT you would only enter £120. Now, if you were to account for the VAT you would be incorrectly accumulating VAT on your balance sheet and showing this as an asset, which isn’t the case as you can’t reclaim later. The simple fact is, if you’re not VAT registered you should never be itemising your VAT. This is why on QuickFile we hide the VAT columns to prevent you from accidentally itemising your VAT.

What if I become VAT registered later and I want to reclaim VAT on previous expenses?

First of all the VAT you can retrospectively reclaim is very limited and mostly relates to capital purchases over a certain value. You cannot retrospectively reclaim for materials and goods resold. For that reason the purchases you may be able to reclaim on will likely be quite limited.

If you are making purchases that may qualify to be reclaimed later it is advisable to simply attach a copy of the VAT invoice to the purchase record in QuickFile, and later you can perform a search for all items over a fixed amount with attached scans. This should allow you to put together a list of VAT invoices to support any historical claim. It is important that you check the criteria issued by HMRC and ensure you have a full VAT invoice for each.