VAT query
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!
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!
0
Comments
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
Don't include it in your box 7 total
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:
We put it in too Annette! :huh:
Hope this makes things a bit clearer.
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!
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.
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%!
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.