VAT - sole trader expenses

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in AAT member discussion
When preparing a VAT return for a Ltd company with a T/O of £10m VAT returns seemed so easy. Now I’m preparing one for a sole trader and I’m getting myself in knots.

The purchase ledger includes an expenses account for mileage, electricity (as a % as working from home) etc. These items have no VAT against them but do I include them in box 7 on the VAT return. They aren’t technically purchases. If so box 4 will not be 17.5% of box 7. As it is such a tiny amount should I worry? Or should I be explaining this to HM C&E with every VAT return.

Am I even making sense??? I’m having a hard day forgive me! :cry:

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:VAT - sole trader expenses

    You wouldn't include that provision in box 7 for VAT purposes. Essentially that is a year end provision i.e use of home.

    The KPI though could be less than 17.5%... does this sole trader have postage? That needs to be in box 7 but no VAT element will be in box 4 so the KPI will be say 16.5%.

    Regards

    Dean
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:VAT - sole trader expenses

    Yes - Dean is right - my KPI for this last quarter is only 11.7% - post, AAT subs (ha ha) etc etc.

    Claudia
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:VAT - sole trader expenses

    Thanks gus. I think what is throwing me is that we had a rule at my last company that if VAT as a percentage of Net purchases deviated from 17.5% by a certain percentage then we would write a cover letter with our VAT return. I'm not even sure why we had this rule (maybe I should have asked) but sometimes it's hard to know if something your boss insits on is just because that's the way they do it or the way it should be done.

    I'm going to stop rambling now.

    Thanks again. And thank goodness for this forum :wink:

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