Hi

I made the mistake of recording some assets as normal purchases and have already claimed the VAT back on them. How do I go about correcting my records now so they're down as assets?

Thanks for your help!

Hello P_K,

Do you mean that you allocated the purchase to an expense account rather than an asset account? If so, you can simply edit the purchase transaction and change the allocated account to an asset.

Regards,

Hi Mark

Thanks for the quick response. The purchases were allocated to pre-registration, but I guess your answer is the same?

Hi P_K,

Ok I understand now. For purchases of assets before you became VAT-registered you should enter these in Solar Accounts with a VAT rate of 0% and VAT Treatment of 'Out of Scope'. Then on the date of registration you should record a General Transaction from 'Uncategorised Income' to 'VAT Liabilities' for the amount of VAT you want to reclaim. Then on your first VAT return you should increase the Box 4 and Box 7 figures as you copy them from Solar Accounts to the HMRC VAT return form.

Regards,

Hi Mark

Sorry, I know I'm being a bit thick here...

Changing the VAT on those asset purchases to 0% has resulted in the records as showing I'm owed money, the VAT amount. Do I just edit the payment record?

Thanks!

Hi again

Just to make this all clear, I'm correcting records from 2011, so the VAT return affected was already submitted and paid a long while ago.

Thanks.

Hi P_K,

Taking another look at your question, you are allowed to reclaim the VAT on some asset purchases before you were VAT-registered:
http://www.hmrc.gov.uk/vat/start/register/purchases-before.htm

If this is the case with your purchases then I think you should leave your purchases with VAT at 20% even though they were made before you were VAT-registered. The account used for these purchases should be an asset account.

Regards,

Okay, so applying the VAT back to those purchase invoices, does that mean I should delete the general transaction mentioned above now?

Thanks for your help!

Hi P_K,

Yes, delete the general transaction.

Regards,

So sorry, just one more question...

When I did my first VAT return, I didn't notice one of my asset purchases, a pre-registration transaction, didn't make it onto the report. This was because it was older than 12 months from that date. So it's all on Solar, but not as having been included on a return and the VAT reclaimed on it.

When I changed the VAT rates back from zero as per your instruction, I see that that general transaction updated to show the VAT applicable to that purchase only.

So, I need to add this purchase to my next VAT return as a correction. Should I still delete that general transaction and just do the figures manually, adding them to appropriate boxes on the return myself?

Thanks so much for your help.

Hi P_K,

Yes, if you recorded the original asset purchase in Solar Accounts showing VAT of 20% then there is no need to record the General Transaction on the date you became registered - you should delete it.

To recover the VAT on the original purchase you will need to manually adjust the figures as you copy them from Solar Accounts to your next VAT return form. You should also notify HMRC that you are making the adjustment to correct a previous VAT return.

Regards,

Thanks for your help!