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:

• VAT: Getting Started
• VAT codes in QuickBooks Online: A complete guide
• Submit a VAT return in QuickBooks Online

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

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.

THanks for this!

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

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.

Thanks so much for all this!

Seriously your a legend!

No problem at all.

Have a good Christmas