How do I ensure VAT tracked for multiple business purchases made personally by Director during business startup?

Hello, Karl!

Congratulations on your new business! I'm truly amazed by your resiliency to start a new business despite the current situation. Let me help you with your VAT.

Let's say you submit your return quarterly. The first step is you'll record the purchases dated in March, so their taxes are reported in the first quarter. 

Usually, we record purchases with personal funds using journal entries. However, journal entries do not reflect VAT amounts on tax returns. So, we'll put the investment into a petty cash account first, and use it to pay the purchases by recording expense transactions. This type of transaction will report VAT in tax reports.

Journal Entry: A debit to Petty Cash and a credit to Owner's Equity.

Record the purchases as expense transactions with VAT

After recording the purchases, you will need to change the starting month of your VAT Settings to March. That way, you can mark the first-quarter return with a reclaimable tax as filed. 

Prepare the report in the first quarter, and mark it as filed.

After marking the first-quarter return as filed, go back to your VAT settings, change the start month to April, and turn on the MTD option. The VAT will be moved to this period. See about submitting VAT Return for your additional reference.

I'm just a comment away if you need further assistance with your taxes. Take care and have a good day!

OK thanks, I think I understand.

So, I’ve just setup my Petty Cash Account (zero balance).

Can you check the following steps (my understanding) is correct please?

1) Credit the Business Chequing account with sufficient finds to pay the 3 x expense claims (e.g. £2000 – Mar £500, Apr £1000, May £500).

2) Transfer the £2000 from business checking account to petty cash account (using transfer as I won’t physically be withdrawing the funds).

3) Create journal entry for £500 (Mar)  Petty Cash (debit) > Owners Equity (credit)

4) Record as a single purchase/expense (totalling £500) to payee (me – the director owed the money) from the Petty Cash account.

5) Create journal entry for £1000 (Apr)  Petty Cash (debit) > Owners Equity (credit)

6) Record as a single purchase/expense (totalling £1000) to payee (me – the director owed the money) from the Petty Cash account.

7) Create journal entry for £500 (May)  Petty Cash (debit) > Owners Equity (credit)

8) Record as a single purchase/expense (totalling £500) to payee (me – the director owed the money) from the Petty Cash account.

9) Use online banking to pay (me – the director owed the money) as 3 separate bank transfers (£500, £1000, £500)

10) When quickbooks synced with bank account, match the transactions.

11) Follow the instructions on changes to VAT to file etc.

Is that correct?

Assuming I use 3 separate journals for Mar, Apr, May – should the date of the journals be the same date as the 3 separate manual expenses claims (i.e. 31/03/2021, 30/04/2021 and 31/05/2021) or match the date of the physical payments from Business Bank to Personal bank?

Is there perhaps a way of me being run through this step-by-step over the phone?

Another question:

When I credit the business account from my own equity (as a director), I have previously just transferred the money over bank>bank and then categorised it as ‘DEPOSIT: Uncategorised income’.

1. is this correct? Should I be categorising it differently?
2. Do I also need to journal it? If so should it be Owners Equity to ‘something’?

Thanks

Karl

Hi,

I followed the instructions to file the initial VAT return (with MTD off).
It is now showing as PAID, and has not carried over the balance to the open period as suggested in your response above.

I now have a filed return for March-April (Manually filed - showing as paid)

..and an open return for May - which I'll submit on 1st June (via MTD which is back on again)

If I take a look at 'Prepare return' it shows date of 1st May, and only contains calculations from current month.

Do I need to ADJUST the figures to include the figured from the previoulsly filled return to ensure I get the pre-registration VAT back?

REMINDER:

Trading from 01/03/2021 (purchases with vat)

Registered for VAT from 1st May 2021 - MTD setup

Current open VAT period showing as single month of May (VAT returns are quarterly - Feb, May etc).

Please help - I want to complete my MTD vat return on June 1st, but do not want the submission to miss the March-April figures.

Thanks

Karl