cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Everything you need to know about banking in QuickBooks Online - Discover more
RED7STUDIOS
Level 2

How to correctly track VAT on items Bought on credit.

Hey there.

 

Let's say I bought an item for £500, but it was paid off over 3 months for £166 each.

How would I go about correctly marking this transaction and it's VAT down in QB Online?

 

 

6 REPLIES 6
Jovychris_A
Moderator

How to correctly track VAT on items Bought on credit.

Welcome back to the QuickBooks Community, @RED7STUDIOS.

 

I'd advise that you speak to an accountant about how to handle transactions bought on credit. They can assist you further on you would enter this correctly so you can claim the VAT back.

 

When you're ready, I'm adding these articles for your reference to add VAT codes and track it for this specific transaction:

 

I'll be here if you have other questions. Please don't hesitate to tag my name in the comment section. Take care!

paul72
Level 8

How to correctly track VAT on items Bought on credit.

Hi @RED7STUDIOS  

 

Assuming you're on standard (accrual) VAT, the relevant date (for VAT purposes) is the Invoice Date not the payment date.  You reclaim the the VAT against the purchase invoice not against the payments.

 

Enter the invoice for the item as a Bill in QBO - enter the full value & the VAT.

Enter each payment as a Bill Payment in QBO.  These are the transactions you match to the Bank Feed (if that's what you're doing).

 

Hope this helps.

RED7STUDIOS
Level 2

How to correctly track VAT on items Bought on credit.

THanks for this!

 

That makes a lot of sense, I'm on cash-based accounting not sure if that changes things?

paul72
Level 8

How to correctly track VAT on items Bought on credit.

It does - yes.

In that case, the payment dates become the relevant dates for reclaiming the VAT.

https://www.gov.uk/vat-cash-accounting-scheme

With the Cash Accounting Scheme you:

  • pay VAT on your sales when your customers pay you
  • reclaim VAT on your purchases when you have paid your supplier

 

However, I would still enter the Bill & Bill Payments in the same way - & let QBO deal with the VAT.

If you use the Bank Transaction Matching (I don't so can't help with that side) it will be easier to match against Bill Payments than to edit Categories & VAT Codes.

RED7STUDIOS
Level 2

How to correctly track VAT on items Bought on credit.

Thanks so much for all this!

 

Seriously your a legend!

paul72
Level 8

How to correctly track VAT on items Bought on credit.

No problem at all.

Have a good Christmas paul72_4-1671726347711.png

 

Need to get in touch?

Contact us