VAT query

rhm

I was hoping someone can help.

How would you account for the following situation?

A vat registered company buying standard rated goods from a non vat registered company. My understanding is that you would have a number of columns ie, total, vat, std, zero...
Under which heading would you enter the std rated purchases that you have not been charged vat for (buying from non vat reg company), and then selling these goods vat inclusive?

Thanks!

claudialowe

Either zero, or more properly, it is an exempt supply - ie VAT is not being charged at 0%.

At the end of the day it doesn't matter which, the end result is the same - exempt that properly it should not show on box 7 of the VAT return - but in practice during VAT inspections, the inspectors are happy so long as VAT is not being reclaimed.

Claudia

farmergiles

If you have not been charged vat for the products then you would just use the total and goods inwards/goods purchased column. Vat cannot be shown or deducted because you aren't paying it.
Don't include it in your box 7 total

Bluewednesday

I've always put it into box 7 - wonder if we've been doing it wrong all these years?

AdamR

I'm with Annette: I think the figure should be included in Box 7 as a matter of common sense - some businesses may buy all there purchases from non-registered suppliers but charge VAT on the sale (especially if they chose to register before they reach the £67k limit). If you didn't do this, box 7 could in theory be empty.

I'd say the purchase is still Standard rated, it just doesn't have any VAT on it.

PS I'm probably not the most qualified as I don't fill out any VAT returns but that is how I'd do it.

PPS HMRC website doesn't mention anything, but it does have these definate no-nos:
"5.8 Things to remember when completing boxes 6 and 7
Leave out:

VAT itself
wages and salaries
PAYE and National Insurance contributions
money put into and taken out of the business by you
loans, dividends, and gifts of money
insurance claims
Stock Exchange dealings (unless you are a financial institution)
MOT certificates
motor vehicle licence duty
Local Authority rates and
income which is outside the scope of VAT because it is not consideration for a supply.
You should:

show net figures after taking off any credits
treat discounts as described in Notice 700 The VAT Guide
if you use the cash accounting scheme, base your figures on payments made and received, not invoices issued or received."

I can't see a mention of standard rated items from non-registered suppliers so to me that says include them.

Nice that the rules are clear and everyone does the same!:laugh:

Gem7321

Bluewednesday wrote: »

I've always put it into box 7 - wonder if we've been doing it wrong all these years?

We put it in too Annette! :huh:

Bluewednesday

Thank goodness for that - I was feeling very embarrassed for a moment there.

farmergiles

With regard to box 7 inclusion, the VAT department quick check to ensure that the figures are correct is to multiply box 6/7 by the relevant vat rate to see if your totals in box 1/2 & 4 are correct. If you include all non vat totals as well, it gives them a false reading. After a recent client VAT inspection I was told not to include non EEU sales and purchases in the totals shown on the vat reurn.
Hope this makes things a bit clearer.

Bluewednesday

Well we have always done our VAT returns the same way for the last 7 years and have only had VAT inspections on the Companies that regularly have refunds.

Also it depends what Sage code you use for VAT (on Sage accounted companies). We have never T9'd it (which wouldn't appear on the VAT return) so all unregistered purchases go into the VAT return which has also been cleared by the VAT office.

I think the short answer is the VAT office don't care as long as VAT isn't claimed!

farmergiles

I agree to dis-agree. As you say, the vat office don't really care as long as they get their money. I have just passed on what was told me by a Sheffield vat inspector but every inspector has a different opinion(just like the tax inspectors) and it depends on what side of the bed they got out of, what day of the week it is and whether there is a full moon or not....lol

deanshepherd

I'm with Annette too.

I have never had a box 7 figure that when multiplied by the VAT fraction is going to match the box 4 figure.

Inspectors just check that box 7 is not less than box 4 once multiplied down.

Non-EC sales are 'outside the scope' and hence not included, supplies by a non-VAT registered supplier are still taxable supplies. There is just no VAT on them.

Monsoon

We also put all purchases in box 7 unless they are outside the scope. So anything that is exempt, zero rated and those suppliers making taxable supplies but are not registered goes in along with the standard (and reduced) rated stuff.
I was once told that to use T9 in Sage for a non-registered supplier of taxable goods is wrong as the net (which is also the gross in that case) still has to appear on the VAT return.

The means box 5 is never 15% of box 7, but always under. HMRC only care if it's over 15%!

ajames

I would of said supplies from a non-registered would put the supplies outside the scope of VAT, as it has to be made by a taxable person to be inside the scope. So T9 for unregistered VAT suppliers.

qwerty

Supplies from non-VAT registered individuals should be included in box 7 if they would be included in box 7 if they had been supplied by a VAT registered individual.

As a point, assume the trader uses the VAT Retail Apportionment Scheme. Under this he calculates his output VAT by calculating the proporation of goods purchased at each different VAT rate.

So if Mr A in his small corner shop has sales of £4,000 and purchases are:

(a) £1,150 Standard rated goods (inc. VAT) and £1,000 zero rated goods
(b) The exact same goods but from a non-VAT registered supplier (£1,000 + £1,000)

Are his output VAT figures different for the above two examples? NO!

50% of his sales would be assumed to be standard rated - the fact that the supplier in (b) is non-VAT registered doesn't matter. If, as people have mentioned, the purchases are not included in the VAT workings, then there would be no output VAT on Mr A's sales, which is clearly wrong as he is selling some standard rated supplies.

lizzy

It would be treated the same as a standard rated transaction (T1) because that it what it is, but just enter the VAT amount as nil if using Sage. The back of a hard copy VAT return tells you what should be included. The VAT on purchases will rarely agree with the purchases figure when worked out because of non-registered or zero rated transactions etc. I would have thought HMRC would become suspicious if the VAT on purchases claimed was more then expected from the purchase figure & would in most cases expect it to be less