VAT box 6 - Prepayments - Out of Scope

[TimF]

I’m using cash accounting for VAT. When clients make a pre-payment not yet allocated to an invoice, their pre-payment shows up in Box 6 on the VAT return as a sale. However all invoices for some clients will be ‘out of scope’ for VAT, so their pre-payments relate to future ‘out of scope’ invoices. Is there any way to exclude these pre-payments from Box 6?

[QFMathew]

Hi @TimF

As Out of Scope is set an invoice level, when the prepayment is recorded, it’s treated as standard VAT (depending on how it’s entered, you may be able to set the rate, too).

However, when you later assign the payment to an invoice, the VAT will be adjusted and you should see this adjustment in your VAT return breakdown/export.

[TimF]

Hi @QFMathew,

How would I be able to set the VAT rate to zero on pre-payments received in this manner?

Kind regards,

Tim

[QFMathew]

Hi @TimF

The VAT rate is set when the payment is tagged. If you’re tagging from the bank and tagging it as payment on account, you’ll be given a VAT option:

Or if you’re entering it directly to the client record (using the “New Prepayment” option), you’ll be given the option to select the VAT rate there, too:

Hope that helps!

[TimF]

@QFMathew Ok great, thank you!

Kind regards,

Tim