VAT: Voluntary deregistration

George

Can anyone offer advice or thoughts about accounting for stock at deregistration date, please? The client has been using cash accounting scheme.

Thanks for your help.

PGM

Do you treat it as sold with vat, then re-bought without vat?

Then you have the liability of output vat on your books, and re-record the stock at vat inclusive cost.

andrewtdk

You dont need to account for the vat on stock and assets if the vat on these items is below £1000.

Have a look here and on hmrc's website for all the details

http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1083236661&type=RESOURCES

George

Thanks for your replies.

This is where I can't see the wood for the trees!! If the output vat is say £4,000 on the stock on hand at deregistration, what is the double entry - CR vat control account, DR...... ?

Is it the Purchases a/c that is increased by this £4,000, making the gross figure that should have been paid for the stock in the first place?

Thanks for your help.

Monsoon

If all the VAT is from stock then a DR to purchases would work. Don't forget VAT due on assets on hand at deregistration as well as stock.

George

Thanks, Monsoon. When you say it 'would work', are you absolutely positive that this is the double entry? Sorry, I don't mean to put you on the spot.....

Thank you.

PGM

Monsoon wrote: »

If all the VAT is from stock then a DR to purchases would work. Don't forget VAT due on assets on hand at deregistration as well as stock.

On assets, is it the purchase price of WDV?

Monsoon

I don't know if there is a textbook answer. The double entry is whatever is logical. To me, because he's now paying back the VAT he initially reclaimed on the stock, it effectively makes the purchases gross, meaning debiting it back to cost of sales. If this would give a true and fair view of things (being that that stock sold will be sold without VAT, thus the COS needs to be without VAT) then it's a logical debit to me.

The alternative would be a debit to "VAT deregistration" as a misc expense account (much like when you register for VAT and claim pre-registration input VAT, this gets Credited to a specific income line).

I don't know which is right, but if it's all purchases, I would debit to cost of sales. If the VAT is a mix of VAT on stock and on assets, then the latter may be more appropriate.

Monsoon

PGM wrote: »

On assets, is it the purchase price of WDV?

Market value on date of deregistration. As in, fire sale, everything must go today valuation.....

PGM

Monsoon wrote: »

Market value on date of deregistration. As in, fire sale, everything must go today valuation.....

Thanks, that makes sense, that would be the logical solution rather than accounting for all the vat on a asset which has been partially used.