How do you declare an asset of over £2k on VAT return when on Flat Rate Scheme?

How do you declare an asset of over £2k on VAT return when you are on a Flat Rate Scheme?
I recently purchased a van on HP and paid > £2k deposit. As I’m on a Flat Rate Scheme that’s based on 10% of my INCOME, do I have to enter the >£2k amount in the ‘Purchases’ page of Quickfile? If so, will it then be picked up when I do my VAT return?
What happens if that amount (>£2k) is then more than the 10% FRS income? e.g. if the amount in Box 1 and 3 is only say £1200, it’ll produce a negative amount owing to HMRC.

Normally when you enter purchases on flat rate it does not let you itemise the VAT, but there is a checkbox you can tick to allow VAT reclaim on a specific purchase for exactly this case. Tick that box, separate out the VAT and it will be reclaimed via box 4 on your return in the normal way - this is completely separate from the box-6-to-1 flat rate calculation.

Thanks. So, if the total cost of van is, say, £12500, VAT is £2500, would I enter £2500 as a new purchase on the Purchases screen, leave the VAT bit at 0%, and fill in payment details at the bottom as Paid in Full and tick the box to allow VAT to be reclaimed?

On reflection, maybe I should enter the Total cost of £12500 and £2500 for the VAT part and then it’ll show Paid in Part; is that OK though?

As I indicated earlier, I’m also not sure what happens on FRS when the VAT reclaimed, say £2500, is more than the 10% of Income, say about £1200, for the VAT return.

I’m not an accountant, I suggest you check with your own accountant exactly what is the correct VAT treatment - do you book the whole asset up front and treat the payments as a loan, or just book the deposit and VAT now and the rest later, etc.

As for the general question of what happens if the reclaimed VAT exceeds your FR liability - then you will be due a VAT refund from HMRC, exactly as if you were on standard (not flat rate) VAT and had a quarter where you claim more in purchase VAT than you owe on sales.

Regarding Tony Brown’s original question above could I ask how you would deal with the same situation if you used the authorised miles scheme.

As you do not claim anything for the vehicle on this scheme would you still create a purchase invoice and show it as an asset, if so how would you deal with that purchase when it is showing on your accounts as an asset in your balance sheet.

Or do you just manually adjust the VAT return for that particular quarter and not create a purchase invoice.

Thanks in advance.

The authorised business mileage rates are used for business travel in your personal vehicle. Therefore if you buy a new vehicle, and claim the 45p per mile for business miles, it is not a business asset and would go through owner’s drawings/director’s loan account if you have used the business bank account to pay for it.

You can only reclaim VAT when you have a VAT invoice issued by your supplier. If you have an invoice that shows different payment dates, you can only reclaim the VAT on each payment when it becomes due. If you have a VAT invoice from them for the whole amount, and it doesn’t show different deposit and balance payments, then you can claim VAT on the whole amount.

Here’s the extract from the HMRC guide:

Thank you for your reply it was very informative.
So how would I go about claiming the VAT through QuickFile if I do not create a purchase invoice it would not automatically pick it up on the return.
Does that mean I would have to do it manually.
Assuming that I paid for the vehicle in full up front

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