Postponed VAT accounting for a non-purchase

[jwf]

We are VAT registered. After the abolishment of low value consignment relief, we are starting to get HMRC postponed VAT entries on negligible value goods being couriered to us. The goods are worth nearly nothing in market value but the courier evaluates customs value including an estimate of transport charge (CIF = cost, insurance, freight). We are not purchasing these goods. A close analogy might be one company couriering another company in another country a cheap pen as a business gift. Let’s say the pen is worth 1GBP, the recipient makes no purchase but the goods are sent DAP, the courier estimates a freight charge of 50GBP and so there is a (postponed) VAT charge of about 10GBP.

My question relates to how to correctly and most quickly enter them into QF so that the digital VAT submission correctly includes the postponed VAT accounting required (i.e. put in box x the amount you postponed and put in box y the same amount to take away again). One way might be to…

Create a purchase entry with the first line the total customs value (CIF) as ‘guessed’ by the courier at 20% VAT so that the VAT figure for that line agrees with the postponed VAT accounting entry. The next line is then minus that CIF value with 0% VAT selected. Then under ‘Additional VAT options’ I tick postponed VAT accounting. The result is a purchase balance of zero and hopefully, behind the scenes, QF will put the correct values in the correct VAT boxes. Unfortunately, QF does not allow a purchase balance of zero so this does not work.

Can anyone help with a pragmatic solution to this problem? It would be nice not to have to make box adjustments on the VAT submission as this is one of the core things MTD is supposed to prevent.

(As an aside, going forward, I think we can use a special CPC which relieves the shipment of duty and VAT (similar to the code for samples) so we shall try to get this in place.)

[ian_roberts]

The only way I can see to get box 1 right without adjustment would be to have a dummy bank account for these kinds of transactions, find the bank account’s nominal code on the CoA and configure it to be allowed on sales and purchase invoices. You’d then be able to create a purchase for the estimated value at 20% VAT but set the category to the dummy bank account, and tick the postponed accounting box to reverse the VAT.

Creating the purchase will put £50 money in on the bank account, so if you then mark the purchase as paid from the same account it’ll cancel out and return the balance to zero so it doesn’t affect your BS or P&L but it will still put the VAT in 1&4 and the CIF net in box 7.

[jwf]

Thank you for taking the time to understand it, Ian. (And for helping so many other people out on here.) Your solution is very cunning! I shall wait a couple of days to see if there are any other solutions and then crack on with it.

[ian_roberts]

I used to use a similar trick to account for reverse charge VAT on purchases of non-UK services before 2021 (when QuickFile started to support them natively).