Purchases that are part-business and part-personal

I am new to QuickFile and wonder how best to handle expenses that are a combination of business and personal, such as my phone bill.

What I would like to do is ‘tag’ the relevant bank item to an invoice which has two lines - one for the business element which I would assign to ‘Telephone & Mobile Charges’ and a second line for the personal element which I would assign to ‘Proprietor or Partner Drawings’. Unfortunately the system does not let me use that nominal account, so I have created a new one called ‘Personal Use’ but that is treated as just another business expense code in the reports.

I realise that I could edit the bank feed and split each such item into business and personal charges, then assign the business one to a suitable purchase invoice and the private one directly to ‘Proprietor or Partner Drawings’ but that is more trouble and impairs the integrity of my bank feed.

This must be a common requirement for QuickFile users, what is the best solution?

Just tag them normal and actual private use gets sorted at time of tax return

Thanks.

I still need to split each item between business and personal as I can only reclaim VAT on the business element.

I accept that it will be easy for my accountant to make the relevant income tax adjustment, but I thought there would be a way in the system itself so that the various reports it produces would recognise that this personal element was not a true business cost.

In 2020 I think we will be expected to make quarterly digital income tax payments so it would be convenient if the system had a way of automatically handling this aspect.

Typically what I do is

  • enter the purchase with two lines
    • total amount as normal
    • minus the personal bit
  • tag the “payment to a supplier” as normal, which will end up part allocated and part unallocated (you have to use “pay down multiple invoices…”)
  • go to the payment and “refund balance” to drawings

While it is possible to set up your drawings account to be usable as a category on purchase invoices, the vat return box 7 total is derived from the full invoice value, so you’d have to manually adjust out the drawings element. My approach above means the invoice total in QuickFile is only the business element.

Thanks.

That looks a clever workaround to do what I need, slightly non-intuitive but ensures the reports all automatically use the correct business figures.

Rather than the overpay-and-refund thing it may be simpler to just mark the business-only purchase as paid from your drawings account and then the money out of your current account as a transfer to drawings. This has the same overall effect.

Thanks again, but I quite like the overpay-and-refund approach. It clearly shows my business current account paying the supplier for what is principally business use, with a small refund knocked off for the personal element.

I went down the road of doing Credit Notes (CN) for personal expenses and eventually realised that the accounts looked a mess. No CN was received from the supplier; the accounts looked rather queer and not a true representation.

For personal expenditure the invoices received through the business are allocated to a nominal ledger(s) in Assets - Personal Usage.

At the end of a month these are cleared down by doing “Self-billing” (a supplier account in your own name), a single CN (very occasionally an INVOICE) for all personal expenses is issued and paid by way of “Proprietor Drawings Account”, do a Balance Sheet report up to the end of the month and use the figures that are in “Personal Usage” and do opposite entries on the “Self-billing”.

This clears the assets correctly, and if you do not get around to doing it pronto then the P&L report still provides you with a true picture of your business. You also see in “Proprietor Drawings Account” what you have drawn down from the business each month.

The best way is to create a new ledger line in the expenses (PNL) and mark as personal use. Remember. any personal use will be not written off for tax purposes and would add back when you complete your tax return.
Any money earned from the business can be input as personal expense (if used for that purpose), again, you would be liable for IT at the time of filing.
Any help, just PM. Thanks
Momin Nz
Kube Accounts.

That is how I started doing it, but soon saw that the standard reports (P&L, VAT) produced from QuickFile showed it as a business expense line. OK, I can easily make a manual adjustment, but I hoped there would be a way of entering it so that the system automatically treated it correctly.

The overpay-and-refund approach is quite easy and does what I want, albeit a bit of a ‘kludge’ as it states a ‘refund’ has occurred rather than merely an accounting re-allocation.

As there is a specific nominal ledger built in for ‘Proprietor or Partner Drawings’ it would have solved my problem if I had been allowed to enter that on the Purchase Invoice, but it is explicitly excluded!

I create two invoices for the payment, one for the personal element tagged to personal drawings and one for the business use tagged to bank account. Works well for me.

That’s fine if you’re not VAT registered, but if you are then it’ll overstate your box 7 total as it will include the drawings element as well as the actual business purchase.

No think you’ve misunderstood I create an invoice for the portion which has vat to be reclaimed ( minus say 25% personal use) and another purchase invoice for the remainder which is all allocators proprietor drawings. My accountant came to check what I was doing yesterday and all was good.

That’s what I thought you meant. If you create a purchase invoice for the personal part, even if you assign it to a “drawings” category, QuickFile will include the invoice total in box 7 on your vat return - all purchases are included in here regardless of nominal category (and conversely anything posted to a purchase category directly by journal won’t be included).

you are correct I remove the original bank entry and add two separate ones and the personal portion is allocated to drawings, no invoice.