I have recently started my business and one of my suppliers requires upfront payment prior to supplying me with stock. For example, I may make an upfront payment of £500 at the start of each week. At this point there is no invoice created as I have not purchased any goods.
I normally order my stock on a daily basis and thats when the suppliers generate an invoice for the orders placed.
At the end of the month they create an account statement of all purchases + VAT and any surplus balance on my account.
I can claim back input VAT on a quarterly basis and I have set quickfile to VAT cash accounting scheme.
How do I treat the upfront payment to my supplier when it comes to VAT claims, especially if there is an “unspent/surplus” balance (usually about £200-£300) at the end of the quarter please?
You can tag the upfront payments as a payments on account
Enter the payment on the bank screen (manually/by statement import/by bank feed)
Tag a payment
Payment to a supplier
Pay down multiple invoices or assign to a supplier account
Select the supplier
Tick Payment on account (assign later)
Save
The payments would be picked up on the vat return at the rate you set based on the payment date (the tax point when on cash accounting). When you enter the invoices, you can use the log payment option to assign the credit.
Once allocated the next return would correct the values with the correct net/vat split based on the invoice.
Note allocation of payments is done using the oldest credit first
Thank you very much for your step by step guidance, I appreciate it. I have managed to log invoices and payments.
I was under the impression that VAT on upfront payments is claimable when payment is made by me (the customer) to my supplier and therefore claimed 20 percent on upfront payments made to the supplier on my last VAT return.
I want to amend this to put it right and hope forum members can provide some guidance.
Upfront Payments made:
September £300
October £500
Supplier’s Invoice statements:
30 September £145.17 (Gross amount)
31 October £503.07
I have done some search on the forum and may have found a solution.
Raising a credit note for £154.83 (£300-£145.17) against the £300 payment can help with correcting the figures entered for the September upfront payment.
How can I correct the figures entered for October as the Supplier’s Invoice statement is higher than the upfront payment made to the account ?
Also, how do I amend the VAT please as some items purchased attract 5 percent VAT ?