back dateing VAT

astra

Hi, my client has recently registered for VAT, I am going to claim input vat on assets going back 4 years, what is the posting in accounts for this, is it Dr vat Cr asset cost, and does it have any affect on capital allowances? thanks in advance.

Monsoon

Dr VAT Cr Pre-registration Input Vat (i.e. another income line)

No effect on CAs

Andy Blyth

I'm sure you probably already know, but just be aware that 4 years is the maximum time which you can backdate for goods purchased (including assets), but you can only backdate 6 months for services purchased.

reader

Hello

Why do you have to CR income? Does this income get deducted in the tax comp?

Can you post a pseudo-disposal journal instead, i.e.

DR Input VAT
CR Fixed Asset Elimination/Disposal?

Surely if the gross figure was DR'ed to the balance sheet, the correction must involve CR'ing the balance sheet as opposed to CR'ing income?

Note: I'm not saying that my answer is correct (I know it must be wrong because I'm just guessing) but my answer seems to make more sense in my head.

Monsoon

You CR income. It is taxable.
I don't know why. It just is

Bluewednesday

I would normally credit whatever you are claiming i.e. if you are claiming VAT on stock then I would credit purchases in the accounts - as Monsoon says it is taxable but that would still do it as it is reducing the costs.

That way the correct costs would be in the fixed assets etc

Monsoon

As I understand it, its ok to credit the expense if the expense was bought in the same year as the input VAT claim, but prior years should be left unchanged. You are not changing the purchase price of anything but the extra VAT you are allowed to claim back is credited to income. In the case of a large PRIV claim, with vAt being claimed from a range of expense types, it would be vary laborious to match the vat to the expense type and indeed I do not think this is correct; I did have a look earlier to try and find the guidance where it states to credit as income but couldn't quickly find it.

coojee

Monsoon wrote: »

As I understand it, its ok to credit the expense if the expense was bought in the same year as the input VAT claim, but prior years should be left unchanged. You are not changing the purchase price of anything but the extra VAT you are allowed to claim back is credited to income. In the case of a large PRIV claim, with vAt being claimed from a range of expense types, it would be vary laborious to match the vat to the expense type and indeed I do not think this is correct; I did have a look earlier to try and find the guidance where it states to credit as income but couldn't quickly find it.

But as it was an asset that had the VAT on it then surely you have to CR the asset with the VAT. When the asset was originally entered into the accounts it would have been entered at it's gross cost including VAT. Now that you're reclaiming the VAT you must have to CR the cost otherwise the asset would be over stated in the accounts.