Our VAT payment this quarter was a small credit, due to refund of VAT on capital expenditure prior to VAT registration. What entries should I make to ensure the VAT liability account is showing the true VAT position?.

Net VAT to be paid on Quarterly transactions £2134 (approx VAT liability balance)
VAT to be reclaimed on prior purchases £2445
VAT repayment received £311.

Many thanks

Hello Patricia,

I believe that when you become VAT-registered, you should make a transfer from Uncategorised Income to VAT Liability for the amount of VAT you can reclaim. You will also need to adjust the VAT return calculated by Solar Accounts to include this amount.

Note however that I am not an expert on this - you should check this advice with your accountant.

Regards,

I just had the same situation. My accountant advised the following....
Credit the VAT Liability Account with the TOTAL of the VAT re-claim (not just the net amount received), then allocate the amounts back to the various categories of Expense....... for example if you claimed £250 VAT back for Office Equipment, then you should debit VAT Liability £250 and credit Office Equipment £250.
The purpose is to show your net gain (the profit on the VAT reclaim) as a reduction of costs in the relevant category of Expense.

CORRECTION - Do NOT allocate the full value of your VAT Re-claim to the VAT Liability account - just allocate the net reiclaim payment received.