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If your enterprise is registered for VAT then the system will handle all of your VAT transactions and
produce VAT reports. You can also file your VAT100 and VAT101 (ECSL List) returns online through the
Government gateway to HM Revenue and Customs (HMRC).
The principles of VAT are simple:
On sales to your customers (supplies) you charge and collect VAT known as OUTPUT TAX
You deduct the VAT you have been charged by your suppliers (acquisitions) known as INPUT TAX
You pay to or receive from HM Revenue and Customs the difference.
Unfortunately the actual operation of VAT is more complex. Businesses are obliged to cope with multiple
rates of VAT, exempt supplies, rules for trading with European Union as well as other imports and exports.
VAT on certain types of business expenses cannot be recovered as input tax.
The system will deal with all of these issues provided you make a little effort to set up and follow the
processes accurately.
As well as the standard VAT scheme, HM Revenue and Customs allow some special schemes i.e.
Cash Basis Scheme see VAT notice 731on the HMRC web site
Flat Rate Scheme - see VAT notice 733 on the HMRC web site
Flat Rate Scheme cash based turnover - see VAT notice 733 on the HMRC web site
Annual Scheme - see VAT notice 732 on the HMRC web site
The system will deal with these schemes.
To users unused to it, the language of VAT can be confusing and so we strongly recommend that if you
are uncertain about any aspect of VAT recording and reporting you should seek appropriate advice from
your advisors.
The use of online filing of VAT returns is efficient and saves time, it can also reduce the possibility of
errors, and we commend it to you. It is quick and easy to set up; see the Online VAT filing user guide for
full details.
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Table of Contents
VAT Schemes ........................................................................................................................................................... 4
Setting up for Recording VAT .............................................................................................................................. 4
Flat Rate Configuration ..................................................................................................................................................... 7
Special Situations Flat rate and Flat rate cash based turnover method ............................................. 17
a. Amending the Flat rate effectivity dates / Ending flat rate ................................................................................. 17
b. Change of Flat rate percentage ................................................................................................................................ 18
c. Cash Scheme and Miscellaneous Deposits ........................................................................................................... 18
d. Selling goods and services to customers in the EU ............................................................................................ 19
e. Selling goods to other parts of the world (Exports)............................................................................................ 20
f. Buying goods from EU suppliers .............................................................................................................................. 20
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VAT Schemes
In the standard scheme VAT is accounted at the tax point date shown on invoices raised or received. The
Cash Accounting Scheme allows you to account for VAT on the basis of cash amounts actually received
or paid out. Certain conditions must be fulfilled before you can use the cash accounting scheme, please
check with your advisor before selecting this option.
Annual Accounting is aimed at smaller business entities, the scheme works by allowing one return each
year. A number of interim payments (usually nine) are made during the year and a balancing payment
made when the annual VAT return is made within two months of the end of the accounting year.
The Flat rate Scheme offers another option. Under the normal VAT rules the details of the VAT and the
net value have to be recorded for each sale and purchase transaction. For the flat rate scheme however it
is not necessary to record the individual VAT details, but simply accumulate the value of all VAT inclusive
sales (supplies), including any zero and exempt rated supplies, and apply a flat rate percentage to the
total in each VAT period. No separate claim for input VAT (VAT on purchases) is allowed or necessary.
The scheme is only open to business whose annual taxable turnover does not exceed certain limits.
(Please check with your advisor)
In essence there are two versions of this scheme. The first is based upon the VAT inclusive turnover
calculated as invoices are raised (the accruals principle of the standard VAT scheme). The second is
based upon a cash basis i.e. when invoices are actually paid, equivalent to the Cash VAT scheme.
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If you are using the flat rate scheme click the Flat Rate VAT box, note that if you are using the flat rate
cash based turnover method, please be sure that Cash accounting scheme is also selected in the VAT
Scheme box.
Select from the drop down box the VAT Scheme operated, either standard or cash.
The next two fields require details of the VAT Periods that apply for reporting and the Next VAT Period
End Date that will apply as you start to use the system.
Note that period end dates are usually at a month end, but it is possible to have a mid month such as the
5th, just enter the date as normal. Note that dates of the 28 to 31st will at the next VAT period default to
the calendar month end.
If you are UK VAT registered trader that supplies goods, or a trader that supplies services that would be
accounted for by a registered trader in another EU member state using the reverse charge mechanism,
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then a quarterly (or monthly) EC sales list (VAT101) return is required by HMRC. Select the appropriate
ECSL Filing Cycle for the business. The default is quarterly. The filing must take place within 21 days after
the calendar quarter end for online filing or 14 days if using paper filing. If the quarterly turnover exceeds a
limit (35k from 1st January 2012) for goods then the ECSL cycle is monthly. Enter the date of the Next
ECSL period End. This will only need to be set once, unless the filing cycle is amended. If using quarterly
filing this will be 31st March, 30th June, 30th September or 31st December. Monthly filing will require the
month end date.
Note that the ECSL filing deadlines are not necessarily the same as the VAT 100 deadlines for the
business.
If online filing for ECSL is being used the VAT postcode is required. This is the postcode that appeared on
the registration documentation, or was subsequently formally amended with HMRC.
Click Submit to save the details.
The recording of VAT transactions starts with immediate effect, including all transactions
dated this day.
Flat Rate Configuration
If you have ticked the flat rate scheme box you will be directed to an additional screen allowing for input
of flat rate percentages and effectivity dates.
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Click Add Item and in the first instance the From Date is the date when HMRC granted permission for the
entity to use the flat rate scheme and the To date is the date when the use of the particular rate changes
or the scheme changes to some other. These dates are important for the correct transition between
schemes.
Enter the flat rate percentage (In the format xx.xx) to be applied in the Flat Rate box.
Note that if the registration date is less than 12 months in the past it is important to enter a record for a
discounted rate ending on the day before the first anniversary of VAT registration. A second record it then
required with a From Date on the anniversary with the main rate.
Click Submit to save the details.
Average (Avg.)
This code can be used where the transaction is recording an aggregation of mixed VAT codes in a single
line entry with the VAT amount manually set as required.
This code will also appear in VAT transactions reports in an entity using the cash basis scheme. This is
because there is a possibility that a transaction with mixed vat rates may be partially paid, in which case
the vat has to be pro-rated as an average rate.
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Out of Scope
This VAT code is only used where a transaction is not in the VAT system at all. For example payments into
a money purchase pension scheme are Out of Scope because they are equivalent to savings. Payments
of salaries or wages are also out of scope as are repayments of directors loans. Using this code will result
in no VAT reporting impact.
Use this code in making or receiving actual VAT payment amounts.
None
This code is used where there is no VAT on a transaction. This is not the same as zero rated or exempt.
The impact in the system is that the value of the purchase is included in the VAT 100 return, but no actual
VAT. You would use this for instance if a purchase is made from a non-VAT registered supplier, who
would not add any VAT. The purchase value is then picked up in the VAT100 return.
Registration and deregistration
There is an obligation to register when the value of your businesses taxable supplies (or distance sales or
European Union acquisitions) in the prior 12 months exceed the current threshold. You must notify the HM
Revenue and Customs National Registration Service within 30 days from the end of the month that this
occurred. Alternatively if you expect your taxable supplies (or EU Acquisitions) in the next 30 days alone
to exceed the threshold, you must notify within 30 days of that date. You will have to account for VAT the
first day of the second month after you exceeded the registration threshold.
We strongly recommend that you consult with your Advisor in deciding your VAT position.
When your VAT registration has been confirmed, you will know the date from which you must account for
VAT.
Deregistration
Under certain circumstances deregistration may be allowed or required. In that event a date of
cancellation will be notified by HMRC. In the VAT configuration screen enter the date provided by HMRC
for deregistration in the Final Return (Deregistration) Date box. The current VAT100 return will now
default to this date and all open VAT transactions dated up to and including this date will be included.
Finalise the return in the usually way.
If there are any transactions in the system dated after the final return date showing a VAT implication
these will need to be amended to remove any VAT. When this is complete return to the Business Profile
Accounting Options tab and un-tick the Track VAT box. From now on transaction input screens will not
show any VAT reference.
If in the future reports are required from any closed VAT periods simply temporarily switch Track VAT
back on to see the VAT menu and VAT reports.
Viewing any transactions from the period when VAT was in effect will show the VAT impact as recorded
and reported.
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the end of VAT period closure. The system automatically transfers the amounts due to or from Revenue
and Customs to the VAT Liability Account during the VAT period closure routine.
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It is possible, for a particular transaction to overwrite the VAT rate, in which case the relevant VAT impact
is recorded. You may use this in the situation where an expensive capital asset is purchased. (Section 3.8
VAT Notice 733)
If a user does not wish to do anything, leave the screen and proceed to close the VAT period, if not, the
listing allows a user to define the VAT rate that they would wish to apply to any particular deposit as
shown below: -
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When Submit is clicked a reversing VAT Journal is created for each item. It posts a VAT amount
computed from the selected VAT code to a sub account of the VAT Control Account - VAT on ACCOUNT
(Cash Scheme). The VAT100 and the VAT transactions Reports will record the appropriate VAT and
turnover amounts when the return is accepted for filing; also the initial journals are locked because they
are included in a closed VAT filing.
Note the balance on the VAT on ACCOUNT (Cash Scheme) will normally be zero as the Journals are
reversing.
When in the next or subsequent VAT periods the Miscellaneous Deposit is finally applied, the VAT will be
processed as normally but because there is a reversed amount from the Journal the impact will be an
adjusted amount If a different VAT rate is applied to the sales invoice or no further impact.
A user may cancel journalising unapplied deposits any time prior to accepting a VAT return, by going back
to the unapplied listing, where the VAT codes will by default, be reset to Ignore Item and clicking Submit
again.
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See VAT Reporting and VAT100 / VAT101 (ECSL) returns section below for more information.
The report can be accessed from the VAT menu
VAT Reports View Saved EC Sales List Returns
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A VAT amount based upon the standard rate will be automatically calculated, if this in not the rate
that should apply calculate the correct VAT amount and overwrite with that amount.
The system will record both the output and input side impacts.
Note that if you are using the cash based scheme, the transaction will be recorded immediately (not
when the bill is paid) consistent with Para. 4.3 of the notice 731 Cash Accounting.
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Enter the transaction normally and select a VAT rate that would apply if the purchase had taken
place from a UK supplier.
Then in the Analysis Tab simply check the box Reverse Charge VAT in the analysis tab. The
appropriate entries are made to the VAT100 report and any VAT transaction reports.
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If the Transaction is subsequently viewed or edited, the displayed VAT rate will show Out of
Scope. If you wish to amend the figures make sure you again use a relevant VAT rate and ensure
the Reverse Charge VAT box remains checked.
We repeat It is strongly recommended you take advice from HMRC or your advisor to ensure that this is
the correct VAT accounting required.
Special Situations Flat rate and Flat rate cash based turnover method
a. Amending the Flat rate effectivity dates / Ending flat rate
The dates for which the flat rate scheme applies can be amended in Configure Flat rate(s)
VAT Configure Flat rate(s) Flat Rate Start or End Date
The impact of changing the dates is that all open VAT transactions (i.e. not yet included in a VAT return)
will amended as appropriate.
If before the date change the transaction was not caught as flat rate but now is, it will be adjusted to be
flat rate and vice versa.
If use of the Flat Rate Scheme is to be terminated an End Date for the last occurrence of a flat rate
percentage must be entered before the Flat Rate Box on the configuration screen is unticked. This is
usually done at the end of a VAT period.
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If a user does not wish to do anything, leave the screen and proceed to close the VAT period, if not, the
listing allows a user to define the VAT rate that they would wish to apply to any particular deposit as
shown below: -
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When Submit is clicked a reversing VAT Journal is created for each item. It posts a VAT amount
computed from the selected VAT code to a sub account of the VAT Control Account - VAT on ACCOUNT
(Cash Scheme). The VAT100 and the VAT transactions Reports will record the appropriate VAT and
turnover amounts when the return is accepted for filing; also the initial journals are locked because they
are included in a closed VAT filing.
Note the balance on the VAT on ACCOUNT (Cash Scheme) will normally be zero as the Journals are
reversing.
When in the next or subsequent VAT periods the Miscellaneous Deposit is finally applied, the VAT will be
processed as normally but because there is a reversed amount from the Journal the impact will be an
adjusted amount If a different VAT rate is applied to the sales invoice or no further impact.
A user may cancel journalising unapplied deposits any time prior to accepting a VAT return, by going back
to the unapplied listing, where the VAT codes will by default, be reset to Ignore Item and clicking Submit
again.
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See VAT Reporting and VAT100 / VAT101 (ECSL) returns section below for more information.
The report can be accessed from the VAT menu
VAT Reports View Saved EC Sales List Returns
A VAT amount based upon the standard rate will be automatically calculated, if this in not the rate
that should apply calculate the correct VAT amount and overwrite with that amount.
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The Reverse Charge Procedure is not used under the Flat rate scheme.
VAT Reporting and VAT100 / VAT101 (ECSL) returns
Specific reports are available to help you prepare your VAT return, see below.
VAT Online Filing
If you have clicked the Use Online VAT Filing box then the VAT100 and EC Sales list can be sent
electronically directly from the system via the Government Gateway to HMRC. Please see the VAT Online
Filing User Guide for more information.
Accepting the VAT100 means that the system rolls over to the next VAT accounting period, and all the
transactions included in the report are flagged as VAT reconciled.
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Finally the amount of the VAT due to or from Customs for the relevant VAT period is moved from the VAT
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VAT Reports View Saved VAT Return Reports View the VAT100
VAT
Deleting a VAT return re-sets the status of everything to the pre-acceptance condition.
Other than the VAT 100 Preparation activity (see above), all other VAT reports are available from the VAT
Reports menu.
The system defaults to the date range for the current VAT period, if you need a report for other periods or
covering multiple periods modify the dates as required and click generate.
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in which they were included in a VAT 100 even though dated in a different VAT period.
The All Trading Up To option, which will require the user to enter a valid VAT period end date, is a report
that will display all
VAT relevant transactions from commencing using the system up to and including the selected date. In
effect a history of all entries to the VAT control Account, not necessarily what has been reported on
VAT100 returns if the entity is using the cash scheme.
Tax Point
Reference
Name
Memo
VAT
Code
VAT
Rate
Outputs
Invoice
11/12/2012 00010354
S3
S3
0.200
0.200
Invoice
21/12/2012 00010355
S3
S3
0.200
0.200
VAT Amount
Net Amount
5,000.00
400.00
1,080.00
2,000.00
365.00
473.00
Total Outputs for VAT period ending 01/2013
Inputs
Bill
Debit Card
1,553.00
06/12/2012 457245
14/12/2012
Laser Printer
Laser Printer
Fuel on Account
S3
0.200
S3
0.200
16/12/2012 457256
21/12/2012 004879
(1,700.00)
(340.00)
ZR
S3
(210.00)
(145.00)
(245.00)
0.200
(49.00)
Debit Card
23/12/2012
The Restaurant
S3
0.200
Bill
28/12/2012 823744
S3
0.200
Credit Note
05/01/2013 823862
S3
0.200
Expense Claim
25/01/2013
Huntrose, Sandra
S3
0.200
Expense Claim
31/01/2013 Jan 13
Huntrose, Richard
S3
S3
EX
0.200
0.200
(56.00)
(11.20)
11.20
(350.00)
(70.00)
94.68
18.94
(141.92)
(28.38)
(100.00)
(108.33)
(25.00)
(41.67)
(552.11)
(2,986.57)
Total Outputs
Total Inputs
1,553.00
(552.11)
7,765.00
(2,986.57)
1,000.89
4,778.43
28/02/2013
01/2013
01/2013
01/2013
01/2013
01/2013
01/2013
7,765.00
(42.00)
Bill
Bill
VAT 100
01/2013
01/2013
01/2013
01/2013
01/2013
01/2013
01/2013
01/2013
01/2013
01/2013
01/2013
01/2013
01/2013
01/2013
01/2013
01/2013
01/2013
01/2013
01/2013
01/2013
Page 1
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If you choose to pay your VAT by nine monthly instalments, each payment will be 10 per cent of the total
amount of VAT you paid to HMRC in the previous year, or 10 per cent of the estimated total annual
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amount of VAT due to HMRC if you have been registered for VAT for less than 12 months. Your payments
will be due by the end of months 4 to 12 of your annual accounting year. If you choose to pay your VAT by
three quarterly instalments, each payment will be 25 per cent of your previous year's VAT liability, or 25
per cent of your estimated VAT liability if you have been registered for VAT for less than 12 months. Your
payments will be due by the end of months 4, 7 and 10 of your annual accounting year. The balance of
your actual VAT payable for your annual accounting year, based upon the VAT Return that you complete
at the end of the year, is due two months after the end of your annual accounting year.
Annual returns are completed in exactly the same way as quarterly returns, except that after calculating
the annual VAT payment due, you deduct the interim payments you have already made to arrive at your
end-of-year balancing payment due to you or HMRC.
Run the VAT 100 report, VAT transactions reports and EC Sales lists report (if necessary)
Transfer the data from the VAT 100 report to your VAT return.
Ensure that the account is the VAT Liability Account and the amount to be paid is shown in the Net
field.
Select Out of Scope as the VAT code. The VAT field must be zero, because the payment of VAT
has no impact on the VAT itself.
The use of online filing of VAT returns is efficient and saves time, it can also reduce the possibility of
errors, and we commend it to you. It is quick and easy to set up, see the Online VAT filing user guide for
full details.
VAT Refunds
If you receive a VAT refund from HMRC use a miscellaneous deposit transaction. See Miscellaneous
Deposits user guide. Select the VAT Liability Account as the account.
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In addition, reports are available detailing all transactions recorded between any dates. Also reports of all
transactions for a particular account or group of accounts can be run. These are available from the
Reports menu
Save Item, the transaction now shows the gross amount and VAT amount, Submit the transaction.
The system will automatically properly deal with the non-recoverable VAT.
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The cost of the VAT disallowed is recorded in the profit and loss report as Non-recoverable VAT. In the
VAT control account and the VAT 100 report (and VAT Transaction report) the net value is shown as the
value of supplies received but no input VAT is recovered.
Dealing with other items that need to be disallowed
Enter and Submit a purchase transaction in the normal way. The disallowable amount of VAT will need to
be adjusted in the VAT control account. Use a journal entry to do this.
The adjustment amount is entered as a Journal Entry, accessed via the Entity Name menu.
Entity Name Journal Entry Journal Tab
The example shows a disallowable amount of 2.00, posted to the VAT control account and charged to
the non-recoverable VAT account as an expense. Note that the VAT input (e.g. Expense) button is
selected so that the VAT 100 return correctly displays the adjustment.
More information on using journal entry transactions can be found in the Using Journal Entry user guide.
b. Dealing with Fuel scale charges (fuel provided for company vehicles)
If your business provides fuel both for private and business use, and you claim the input tax as a
deduction, HMRC require you to use a fuel scale charge to account for some output tax. The scale charge
is published periodically by Revenue and Customs. If necessary we suggest using a spread sheet to
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prepare the charge for each VAT Period. Calculate the VAT amount due from the relevant scale and the
number of Vehicles.
Note that for Flat rate scheme users no adjustment is necessary or allowed because no vat on fuel
purchases has been claimed as input tax.
Details of the scale charges, which are usually modified at each budget, are available from the HMRC web
site. The scales relate to annual, quarterly and monthly VAT accounting periods.
The VAT amount is entered as a Journal Entry, accessed via the Entity Name menu.
Entity Name Journal Entry Journal Tab
We suggest that the Memo field holds a relevant comment such as VAT fuel scale charge
Ensure that the VAT Output (e.g. Income) button is selected because the impact is to increase the
VAT liability to HMRC.
Enter the VAT amount as a credit to the VAT control account. Then also as a credit enter the VAT
exclusive amount (net) to a expense account (in this example Vehicle fuel and oil), also set the vat
rate and the vat amount in the memo fields (this will ensure that the VAT exclusive amount is
included in the VAT100 return correctly in box 6
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Finally enter a debit to the same expense account above ((in this example Vehicle fuel and oil) for
the VAT inclusive fuel scale charge.
More information on using journal entry transactions can be found in the Using Journal Entry user guide.
The
example shows an adjustment amount of 10,200, posted to the VAT control account and charged to the
non-recoverable VAT account as an expense. Note that the VAT input (e.g. Expense) button is selected
so that the VAT 100 return correctly displays the adjustment.
More information on using journal entry transactions can be found in the Using Journal Entry user guide.
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f. Bad Debts
For bad debts, various rules can apply depending on your vat scheme.
Standard scheme
Provided you have:
You can reclaim the VAT already paid. The actual vat recovery can be achieved by clicking the red
WRITE-OFF box adjacent to the relevant invoice in the receive payments screen. The system will post the
appropriate entries to recover the VAT.
Activities Receive Payments
Cash Basis scheme
As by definition the debt remains unpaid no VAT has been paid to HMRC and so that there is no VAT to
reclaim.
Flat rate Scheme
Provided you have:
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You can reclaim the VAT already paid. The actual vat recovery can be achieved by clicking the red WriteOf box adjacent to the relevant invoice in the receive payments screen. The system will post the
appropriate entries to recover the VAT.
Activities Receive Payment
Flat Rate Scheme cash Based Turnover
As by definition the debt remains unpaid no VAT has been paid to HMRC and so that there is no VAT to
reclaim.
Select a normal purchase transaction such as Bill/Credit Note or Card Transaction from the
Activities menu.
Enter the gross amount including the VAT element (in the net field) against the relevant expense
account and select EU VAT code. Do not enter any VAT amount in the VAT field; Save Item
Add Item for a new line and select EC VAT recoverable account from the Current Assets - Other
section of the chart of accounts.
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Note if the account does not exist, see Chart of Accounts user guide about adding a standard
account to open the account.
Enter the EU VAT amount in the net field, select vat code EU VAT. Do not enter any VAT in the VAT
field; Save Item.
Add Item for a new line and select Foreign VAT recoverable account from the Other Expenses
section of the chart of accounts. Enter the EU VAT amount as a negative item; select EU VAT as the
code and no VAT in the VAT field; Save Item.
The profit and loss report will show the full cost (EU VAT included) against the expense account.
The amount recoverable is shown as a negative Other Expense. The Balance sheet shows the
amount as a Current Asset Other until the cash is received.
The VAT 100 report will show the purchase value including the EC VAT in boxes 6 and 9, because
the EC VAT is out of scope for UK VAT purposes.
When the cash is received from the EU member state, use Miscellaneous deposit to post the cash.
Select a normal purchase transaction, Enter Bill/Credit Note or Enter Card Transaction from the
Activities menu.
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Enter the net amount excluding the VAT element (in the net field) against the relevant expense
account and select EU VAT code. Do not enter any VAT amount in the VAT field.
Add Item for a new line and select Foreign Non-recoverable VAT account from the Other
Expenses section of the chart of accounts. Enter the EU VAT amount in the net field, select EU VAT
as the code and no vat in the VAT field; Save Item.
Note if the account does not exist, see Chart of Accounts user guide about adding a standard
account to open the account.
The profit and loss report will show the VAT exclusive cost against the expense account. The amount not
recoverable is shown as an Other Expense. The VAT 100 report will show the purchase value including
the EU VAT in boxes 6 and 9, because the EC VAT is out of scope for UK VAT purposes.
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