Hi, quite new to Quickfile. Hopefully someone can advise on the correct way to do the following.
Say for example my total broadband bill is £30 monthly, In previous years I have put all of this through my books and then my accountant has made an adjustment at the end of the year saying that only 50% of this is a business expense. I understand I can also make this adjustment at the year end with Quickfile. My query is regards to VAT. If I didn’t want to claim the 50% of the vat paid would it be correct in accounting terms to enter the vat percentage as 0%? Alternatively, how would i go about reclaiming just 50% of the VAT paid?
You can stick with your current approach of recording the whole purchase and making a year-end adjustment, but to handle the VAT you’d need to make a manual adjustment to your VAT return to reduce box 4 by £2.50 and box 7 by £12.50 for each monthly bill (so 3 x that for each quarter). Then your end of year adjustment journal would need to take the personal portion of the net off the relevant expense nominal and the personal portion of the VAT off the 2204 “manual adjustments” nominal, and debit the gross total to drawings (assuming you’re a sole trader or partnership - I’m not sure how it works if you’re trading as a limited company, you’d have to check with your accountant on that one).
A better approach may be to only record the business-related portion of the expense in your QuickFile books in the first place, not the personal portion. If the total bill is £25+VAT = £30 total, then you’d record a purchase in QuickFile for just £12.50+VAT = £15 total (the 50% business portion), and mark that as paid from your drawings account. If you find it clearer you could make a two-line purchase record, one line for £25+VAT matching the total and then another for minus £12.50+VAT representing the personal portion, either way the aim is for the purchase total to be £12.50 net plus £2.50 VAT.
If the actual £30 payment comes out of your business bank account then you’d tag that £30 as a transfer to the same drawings account - £15 of that offsets the business purchase, the other £15 is genuine drawings, as it’s money you’ve taken out of the business for personal use. This way you’re accounting for the 50% personal as you go along, so no need to make any adjustments to either your VAT returns or your year end totals.
That’s very helpful and I can use your latter suggestion.
I have a further couple of questions on a similar theme.
Firstly, I have a small monthly payment for my mobile phone which is part
business / part personal. My provider despite charging VAT says they do
not provide VAT receipts for their pay as you go customers (not sure this
can be legal but that’s for another forum!).
What is the correct way to account for non recoverable VAT on purchases?
Should i just enter the VAT rate as 0% from the drop down menu in the
purchases form?
My other query relates to fuel. Currently I put all my fuel expenses
through the accounts and then at the end of the year my accountant makes an
adjustment for the percentage of business miles, I believe this is called
the Actual Cost Method . At the moment I don’t reclaim any of the vat. If
I wanted to continue in this way would I assume I would classify this as
non recoverable VAT and account for it in Quickfile as above?
Happy to consider a better way of doing this if you have a suggestion!
Yes, you’d put the inc-VAT total in the “net” column and set the VAT to 0%. Think about it like this - when you record a purchase in QuickFile you’re not recording how much VAT you were charged, you’re recording how much VAT you intend to reclaim. The “net” column is “how much did this purchase cost my business”, the VAT column is “how much on top of that did I pay the supplier but will later get back from HMRC”. If you’re not able to reclaim the VAT then the cost to your business is the total amount including VAT.
Well… if they’re charging VAT then they legally have to provide a VAT invoice when asked to by a VAT-registered customer, but you’ll probably find that the contract you’re on has a clause somewhere saying it’s only for private customers, not business ones, and that if you’re using it for business then you have to switch to a different tariff.
Is the phone paid for by you personally or by the company? If it’s paid by you, then the business can reclaim the VAT, even though there’s no VAT on the receipt, as it’s a taxable supply and they’re not obliged to provide full VAT invoices to personal customers. As lomg as you have a receipt with a VAT number on it, I would still claim.
The 0% VAT rate is for circumstances where the supply is taxable, but either the supplier is not VAT-registered, or you cannot reclaim the VAT anyway, such as for business entertaining. Using the 0% code ensures that the value of the purchases is correctly included in the VAT return.
And when you say fuel, are you meaning the business pays for your all your petrol? You can reclaim the VAT relating to the element that is business use, so you would be better off applying the percentage relating to business miles to each receipt, and claiming VAT on the business part, in a similar way to the way @ian_roberts described for your broadband bill.