First Previous - Page 1 of 1 - Next Last

VAT invoice recording query - HELP PLEASE

  • Member PM.Dip
  • Practice Licence
  • 6 posts
  • # 55398

Hi All,

I have recently taken on a new client who unfortunately had to get rid of his previous bookkeeper due to getting the accounts in a mess.

They have recently purchased equipment for over £1.8m + vat and part of the deal was that they were able to reclaim the VAT up front on a VAT only invoice and thereafter zero rated net amounts would be invoiced on a monthly basis, small amounts to start to aid cashflow and increasing thereafter.

The first invoice was Net = Nil, VAT = £370k and total £370k
One month later the invoice was Net = £5k, VAT = Nil and Total = £5k
2nd month invoice was Net = £5k, VAT = Nil and Total = £5k.

Looking on sage I have found the previous bookkeeper has entered the initial invoice as Net = £1.8m, VAT = £370k - which would make sense in order to get the correct amounts into the accounts before the Year end - however, this will not tie into the invoices if there is a VAT inspection and the directors have asked me to ensure all of the invoices are posted, but if I do this I will end up doubling the net amount.

Any advice as to the correct posting of this would be extremely helpful.

Thanks

Lisa

  • Member PM.Dip
  • Practice Licence
  • 117 posts
  • # 55437

Hi Lisa

Personally I can't figure out how the supplier could raise a VAT only invoice, then raise zero-rated invoices later.  Please let me know how if they can!

Instead, this sounds like a more logical method:

Supplier invoices the net 1.8m+ and VAT 370k (your client can thereby reclaim the VAT in full as they have a VAT invoice and the goods have been supplied)
One month later the supplier sends a STATEMENT for 5k payment (not an invoice)
Two, three months, same again.

Would be worth checking if the demands for 5k are labelled 'Invoice' or 'Payment Request'/'Statement' as there is obviously a difference.

On Sage you will simply post the payments as a supplier payment, reducing the creditor.  You may have to include interest as part of this agreement.

As I said, this sounds an easier and more correct method, but you will have to check the paperwork and maybe even with the supplier to confirmthis is what happened. 

Regards

Andrew

  • Member PM.Dip
  • Practice Licence
  • 58 posts
  • # 55439

I agree with Andrew, this doesn't sound right at all.  I suspect it should be an invoice for the total at tthe start, and the agreement is that the payment is deferred over (a considerable) time.  This would enable the asset to be shown on the balance sheet, but you will need to check the paperwork for title of goods. and whether this is an HP or a lease purchase etc.  The rules are different.  I susgest you check with your accountant too.

  • Member PM.Dip
  • Practice Licence
  • 6 posts
  • # 55440

I agree with you both that showing the net of the asset with the vat would be the logical way - however the invoices are definitely as I posted above with the first being a vat only invoice showing Nil net amount and the others thereafter are definitely stating 'invoice' not statement which has confused me - and the VAT lady from HMRC who did the initial inspection was shown the invoice and said nothing about it being nil net amount - but she didn't check the accounts system to see how it was posted - hmm think this is one for technical support.

If I find out if its possible I will let you know.

Thanks

Lisa

  • Member PM.Dip
  • Practice Licence
  • 1 post
  • # 55444

Hi Lisa

It is okay to receive a VAT only invoice upfront, many suppliers selling expensive equipment will provide the client with loan agreements, some will include the VAT element some won't, it will depend on how the supplier is paying his share of the VAT and when.   If you have received a VAT only invoice it will allow you to reclaim the input VAT element on your next VAT return. (Usually the supplier wants the VAT upfront because he has to pay it)
The old Bookkeeper has incorrectly posted the invoice, you will need to cancel her invoice (credit it exactly as she posted it, same dates etc) and re-post it as stated in the invoice i.e Net = Nil, VAT = £370k and total £370k.

Obviously once you have credited the invoice you will no longer have the asset showing, therefore you will need to do Journal Entry

Set up a Loan Agreement Account with Supplier's Name in the Balance Sheet

Debit Your Asset Account   £1.8m
Credit a Loan Agreement Account  £1.8m

When you post the rest of the invoices (as stated on invoice with no vat), code them to the Loan Agreement A/c, this will reduce the amount owed to supplier and keep your ledgers correct

Hope this helps
Sue


  • 698 posts
  • # 55462

Spot on Sue.

You will find where equipment is being supplied where the title of the goods is transfferred the then VAT is charged upfront as the taxable supply date is considered to be the date the goods were supplied under HMRC rules.

Where vat is charged on the instalments this is because the goods are supplied under a Lease or hire purchase basis and the the title of the goods does not transfer until the final payment is made.

I hope this helps.

Stuart

First Previous - Page 1 of 1 - Next Last
bottomBanner
loading