How to tag bank transaction of a loan

Please can you tell me how to tag a loan.
The loan will have no interest paid on it.
I have already tagged the payment of machinery to an invoice for the total amount that came out of the bank account but I can not figure out how to allocate the loan.

Also the invoice for the purchase includes VAT I’m not sure if this has any relevance to the loan.

Hi @BidderGroup

To log a loan and it’s repayments, please take a look at these posts:

If you need any further help, please let me know.

In terms of VAT - are you VAT registered? If not, VAT shouldn’t be recorded. Otherwise, just record it as part of the purchase as you normally would.

Carrying on from this I took a loan to pay a VAT liability - what would be the way to record this please?

Hi @AnythingLegal

Was the loan taken out by your company, or by you personally?

loan taken out by the company

You would record this as another type of loan as per the posts above.

For reference, my colleague posted this guide a while back:

thanks for this - it is helpful as I have been recording previous loans incorrectly!

however is there a way to record it to show that it is for payment of VAT liability?

To record a VAT payment, you would tag an outgoing payment as Tax Payment to HMRC, and select VAT Liability from the dropdown list.

I would assume that the money from the loan went straight into your current account, in which case you would essentially have 3 transactions:

  1. In the loan account, you would have the “money out” transaction equal to the loan value (to show the loan as a liability). This would be tagged as a transfer to your current account

  2. You would have the matching money in transaction in your current account - this would be automatically created and tagged from the above transaction

  3. Lastly, you would have the money out transaction from your current account tagged as a VAT payment.

The last 2 points should mirror your actual bank account (the loan funds being paid in, and the VAT payment going out).