Hi
What category can I select for items bought in the petrol station (when paying for fuel) which are personal purchases? I can’t see directors account or anything
Hi,
In your bank account section should be Proprietor Drawings Account (Sole Trader) or Directors Loan Account (Ltd). You should tag it as drawings to one of these accounts.
Hope this helps.
How do I tag it?
Samantha Sherwood
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Samantha Sherwood
Hi,
Personal Purchases shouldn’t be recorded in your business.
What you can do:
- Create your fuel purchase invoice as usual.
- Go to your banking section and create a “dummy” bank account.
- Go to your current bank account or credit card account (the bank account you used to pay for your fuel
- Create a money out transactions with the exact amount you have paid for fuel and your private shopping
- Tag that money out transaction as “transfer between bank accounts” and select your dummy bank account.
- Go to your dummy bank account and you will see a money in transaction coming from your current account or credit card account.
- Enter a money out transaction using the amount you paid for the fuel only and tag it to your fuel invoice you created earlier.
- Enter another money out transaction using the amount you paid for your private things. Tag this line to your Proprietor Drawings Account (Sole Trader) or Directors Loan Account (Ltd)
Hope this helps
Is there not a way I can just add another category?
No, because you don’t record personal expenses in your business.
You can skip a few steps in @rhc’s process above but the basic principle stands that personal purchases should not be listed in your business books at all.
- Create the purchase invoice showing only the business expense (the fuel)
- Log payment in full from your proprietor drawings account (or Director’s Loan if you’re a limited company)
- The money out transaction on your current account can then be tagged as a bank transfer to drawings/DL
The overall effect of this is that your business accounts will show the business expense in your P&L, and the balance of your drawings/DL account will have gone up (or gone less negative, if it’s overdrawn, i.e. the company owes you money) by precisely the amount of the personal purchases in that transaction. This is exactly what you want to show - your business has spent X amount on expenses and you have drawn/been loaned/been repaid Y amount for personal use.
OK, technically there is a way to assign purchase invoice lines direct to bank account nominals but (a) it doesn’t work for the pre-defined drawings/DL accounts, only for new bank accounts that you create yourself and (b) it messes up the box 7 numbers for VAT returns so even if you’re not VAT registered now it’s best not to get into the habit as you’d have to change to the method I recommended above if you do ever need to register for VAT.
Create a new expense (or asset) code in the chart of accounts and name it personal expenses. If there are any parts of supplier invoices/receipts that relate to personal expenses code them here and do not split out the VAT on the personal expenses.
Then ensure you create a journal at your year or month end to transfer all the personal expenses to either the Director Loan or Proprietor Drawings account.
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If you add it as an asset account (Assets & Liabilities/Debtors), then it will show up as a debtor in the trial balance, which can easily then be cleared to drawings at year-end. It should also not appear in any of the boxes in the VAT return if that’s applicable. It also keeps it out of the P&L as it shouldn’t appear there at all.
As I mention above, if you’re VAT registered then you don’t want to include personal expenses in the QuickFile purchases system at all because the VAT returns take the net values of all purchases when calculating box 7 regardless of what nominal code they’re assigned to. If you put your personal expenses in as asset coded purchase lines then yes, it’ll make your P&L correct, but your VAT return box 7 will be wrong as it will include the total personal purchase values as well as the net business purchase values. To correct this you would have to make manual adjustments, which goes against the MTD rules that say everything should be derived from your electronic records with no manual overrides.
If you make mixed business and personal purchases then record only the business part as a purchase, pay it from your drawings/DL account, then mark the money out from your current account (the business + personal total) as a transfer to drawings/DL.
Is that because the QF VAT return uses the purchase invoice total to populate Box 7? What about if you skip the purchase invoice and just enter it all as a direct payment (which is what it is after all)? Can you then split it between purchases and drawings? I don’t use QF for VAT (or much at all any more tbh!).
Yes. Box 7 is the total net value of all purchases (except for any that are marked out of scope) regardless of nominal code.
No, for the same reason - the VAT return boxes only take their information from sales and purchase invoices/payments, they ignore anything that is tagged directly to a nominal code via “something not on the list”.
I stand by my original message that you should only record business expenses through the purchase system, never personal ones, and if a purchase is part business and part personal then only the business portion should be represented as a “purchase”. The way I suggest above achieves this - pay the business purchase from drawings and tag the payment as a transfer to drawings. If the payment covers £X business and £Y personal then your drawings account would have £X+Y coming in (from the payment) and £X going out (to pay the purchase), leaving £Y “drawn” for personal use.
So can you not, then, have a line on the invoice for “out of scope” and a line for standard-rated?
I agree that personal expenses shouldn’t be in purchases, but people (especially sole traders) do have mixed expenses quite often. You should be able to enter a direct purchase with different VAT rates, which means the VAT return would ignore the ones that are “out of scope” but without messing about with different payments out. The fuel shouldn’t really be shown on a purchase invoice anyway, as it’s a direct spend, not a supplier invoice which is paid later. I do find QF a little awkward at times.
No, there’s probably a feature request thread for this but as it stands now the “out of scope” flag is at the level of a whole invoice or purchase, not an individual line.
Presumably though you can have separate lines at different VAT rates? Just not out of scope?
Correct, the VAT rate is per line, but the out of scope flag is per invoice. As is the exempt flag, though given QuickFile doesn’t do any kind of partial exemption calculations there’s not really a substantive difference between zero rated and exempt anyway - both are supposed to count towards box 6/7.
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