Non-recoverable VAT on purchases

Question asked by Peter Ridgers 7 years ago

There are some situations where VAT on purchases cannot be recovered from HMRC. Usually because a VAT invoice cannot be obtained from the supplier (Electricity companies rarely issue VAT invoices, for example). How should this be handled in Clearbooks - if I record the vat on the suppliers bill I can find no way to stop the value being recovered on the vat return. On the accounting system we used before Clearbooks each expense entry had a switch box to mark whether VAT should be recovered or not.

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4 Replies

Hi Peter

If you have a cost where, even though you know there's a VAT element in it, you can't recover the VAT you just include the cost as a gross sum, without showing any VAT.

So, if the cost was £100 + VAT just record the expense as £120. It is still however declarable in box 7 of the return so use 0% VAT.

Best answer
7 years ago

Hi Peter,

I think the only way you could exclude invoices or bills from a VAT return despite there being VAT on them is by using the exclude check boxes when raising the VAT return itself. After you have searched for invoices using the return - each invoice/bill should have a exclude check box beside it. Tick the appropriate ones and then hit the Create return button:

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7 years ago

Thanks for this answer John - I think you're right although I don't like leaving the problem until the late stage of actually completing the vat return. This could be one of many entries and if the step is omitted you would reclaim more vat than you are entitled to

7 years ago

Hi Peter

If you have a cost where, even though you know there's a VAT element in it, you can't recover the VAT you just include the cost as a gross sum, without showing any VAT.

So, if the cost was £100 + VAT just record the expense as £120. It is still however declarable in box 7 of the return so use 0% VAT.

Best answer
7 years ago

Thanks for your answer Paul. Of the two alternatives (enter as Gross with vat set at manual entry of 0% or enter net + vat with bill set to not be included on return) I think your answer leaves less room for errors while completing the return. On a package I used before Clearbooks (not MTD compliant) if a valid vat number had not been entered for the supplier, the vat would not (and should not) be recovered on the return - it is a pity Clearbooks does not do this but heigh-ho - HMRC says that MTD is the way forward.

7 years ago

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