VAT Claim Hire Purchase

Question asked by Sam Jackson 7 months ago

Hi Team,

I have a bit of a weird question for you regarding a hire purchase agreement.

We have financed some kit. Our account recommended we opt for a Hire Purchase option so that we could claim the VAT element in the earlier period, as we run on a cash based system. The initial payment to the lender was for the VAT element of the total invoice. However this leads to complication on how to account for the net amount on the VAT return in box 7 when it hasn't been paid yet.

What is the best way to approach this? Initially my thoughts were to create two separate bills, one for the VAT element and a second for the Net element. Reconcile the initial payment (the VAT bill) and then reconcile the net amount on a monthly basis over the coming 24 months, however this doesn't work. Any help would be appreciated asap as I've left this to the last minute as per usual!

Thanks

Sam

5 Replies

Hi Sam,

​For this we usually advise the use of a Hire purchase loan account which you will use to pay the bill off in full whick will allow you to claim this back in full. The guide below explains this in more detail.

How to create a Hire Purchase : Clear Books Support

All the best,

Mohamed.

Cheers Mohamed,

I should have searched you help system more thoroughly! Will give this a go and see if I can get it working.

Cheers

Sam

Hi Sam,

Anytime! I hope that helps!

All the best,

Mohamed.

Hi Mohamed, and anyone else who has this question, the method worked a treat.

Cheers

Sam

Hi Sam,

Glad to hear that it helped!

All the best,

Mohamed.

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