Kashflow and pre-trading expenditure

TreadStone

We have a new client who uses Kashflow. We don't. He wishes to claim the input VAT on fixed asset additions of £1150 from 06/04/14. He has only recently registered for VAT from 1 February 2016 so needs to be entered on his first VAT retrun. Can anyone shed any light on the entries to be made in order to do this ? He's cash accounting and I'm pretty sure he hasn't made any entry for the original £1150 purchase anyway.

Thanks.

MarieNoelle

Hi @TreadStone

Could you clarify "he hasn't made any entry for the original £1150 purchase anyway".
Do you mean it isn't on the system or he hasn't yet brought the asset into the business?

TreadStone

Hi,

After logging-into his account it looks as though it isn't on the system. In our final accounts it's a journal entry as such:

Dr £1150 Plant & equipment
Cr £1150 Capital introduced

Personally, I don'y think it's there to be claimed but I'm doing as I'm told so I need to include it in the return on Kashflow. I would normally just add the figures to the necessary boxes on the VAT return when submitting via our agent gateway but he wants it submitting via Kashflow.

Hope that's a bit clearer.

Thanks.

MarieNoelle

At what date is the journal entry?
If it is at 06/04/14 and he wasn't VAT registered yet, the only way I can think of to account for the VAT would be to enter a journal for the VAT only at the date of registration. Say DR output VAT CR P&M. The amount of VAT will not necessarily be the whole input VAT paid at the time but adjusted by the value of the asset at the time of registration.

TreadStone

Looking again at our accounts, there's no way of telling how long he's had the tools & equipment anyway so it's doubtful if he's entitled to claim.

I'm thinking that if I do need to make an entry it would be via a journal -

CR Directors Loan £1150
DR Plant & Equip £958
DR Input VAT £192

Date it 01/02/16 and just make a note in the narrative column.

Thanks for your help by the way.

TreadStone

Yep the more I've looked into it I would certainly agree. The additional problem is that the business was a sole trader and the £1150 was entered (06/04/14) in those accounts before incorporation.

I think he may be able to claim some input on services prior to registration on the 1st Feb but that's all.

MarieNoelle

Agree. The asset was bought by a different person (the sole trader) so the VAT can not be claimed by the limited company.
(I had assumed in my previous post that he was still a sole trader).

TreadStone

Yes I should have said he'd incorporated. I only found out all the facts once I'd looked into the figures myself

TreadStone

Right the £1150 has now been ignored. I've now come across a payment for services he can claim within the 6mth of registration. The gross amount is £840.

This was entered on his system as £840 (no vat) dated 30/11/15. It was then paid on 14/01/16 and allocated against the invoice. Remember he's cash accounting but no VAT was claimed at this time as he wasn't registred.

I've since edited the invoice on the system to show £700 + £140 VAT but what do you do with the bank payment in order to claim the £140 ? Do you unallocate the payment and re-allocate or delete the entry and re-post ?

MarieNoelle

What happens if you run a VAT return now on KF? I would have expected the software to pick up earlier entries not yet included?

TreadStone

It isn't picking up the £140 plus it looks like client has logged in and changed a couple of entries within the date range to further complicate matters.

As it's cash accounting, does the actual bank payment need reposting against the invoice in order to pick-up the input ? Remember the actual invoice is still dated 30/11/15 and I'm running the period 01/02/16-30/04/16

God I hate bookkeeping software

TreadStone

Actually, it's obvious the £140 won't get picked up as both the invoice date and the payment date are earlier than the return period.

I'm now thinking I'll either have to make a journal for the £140 OR change the invoice date and/or payment dates to 1 February ?

MarieNoelle

In this case I would enter a manual journal for the input VAT with an adequate narrative at registration date. DR input VAT credit expense account

TreadStone

I think it may be the advanced settings I need to change, I'll take a look.

Do you use Kashflow frequently Marie ?

TreadStone

mrme89 said:

Does it not pick up unreconciled items for the VAT?

I'm trying to familiarise myself with how it works. The trouble is, I think if I change the VAT reconcilliation start date in the settings, it will pick-up all the entries since that date and not all can be claimed.

MarieNoelle

TreadStone said:

mrme89 said:

Does it not pick up unreconciled items for the VAT?

I'm trying to familiarise myself with how it works. The trouble is, I think if I change the VAT reconcilliation start date in the settings, it will pick-up all the entries since that date and not all can be claimed.

Yes I thought it would.

I used KF a lot in my previous job but have not recently. It may be worth contacting their support team if you have access to them and ask?

TreadStone

Funny you should say that as I've literally just started live chat