If I registered for VAT in May 21, and had an expense in March 21, for: £100 £20VAT = £120 Do I show it (for Self ***** purposes Apr20-21) as 1) £120 2) £100 £20 VAT

dan23589 · ‎January 10, 2022

This is a general query about reclaiming VAT. (Dates are just for example) If I registered for VAT in May 2021, and I can claim VAT on goods up to 4 years ago, and services up to 6 months. Say I had an expense before I was VAT registered in March 2021, which was for: £120 = £100 £20VAT Do I show the transaction (for Self Assessment purposes for Apr20-Apr21) as: 1) £120 expense, or 2) £100 expense i.e. Is the expense still £120 or now £100? It would already be recorded as £120, so surely you can't go back and change it. And under normal circumstances it would be an £100 expense (if recorded after VAT registered), right? Obviously when doing a self assessment tax return it makes a difference as the expense could vary by £20? So the question is really, do you go back and change the transactions prior to VAT registration to include the VAT within the transaction? Or do you just leave it and manually take it off when you do the first VAT return, and still benefit from the full (£120) expense when doing Self Assessment?

paul72 · ‎January 11, 2022

@dan23589 wrote:
... and still benefit from the full (£120) expense when doing Self Assessment?

You certainly shouldn't do that. It's called fraud & is generally frowned upon

I've never heard of HMRC being so generous in allowing four years back-accounting for VAT. Are you sure that's correct?

Usually they give you a start date (on/around your application date).

Be aware that you will surely be expected to reciprocate - so every sale you made after your start date will be considered VATable. You'll either have to re-invoice everything with VAT & chase your customers for the 20% or accept the hit.

You need to be very careful when going back - you need to be aware of what you're doing & keep a good track of every step in case you're pulled for a check (put yourself in the VATman's shoes - a new claimant would be high on the list for a visit in the first year or two).

It would be worth checking with an accountant on your best course.

I would say (as you suggest) that it's not good practice to alter transactions that have already been filed. Personally, I would leave previous year entries alone.

Instead, I would create dummy transactions in the current year (& current VAT quarter) for each of the old transactions. Each transaction needs to balance to £zero because there's nothing to actually pay.

Line one = £100.00 with 20% tax code (this reclaims the VAT).
Line two = -£120.00 with 0% tax code (this cancels out the original transaction & zeroes the current transaction).

Overall, this will reclaim the £20 VAT & reduce your taxable (Self-Assessment) expenses by £20 in the current tax year. So you're not £20 up overall because you're repaying the tax on previous year overclaim (if that makes sense).

Similarly - you will need to do the same for all sales transactions from your start date onwards. You can't just take VAT, you have to give something back!

AS ABOVE (& this is in capitals deliberately) - CHECK WITH AN ACCOUNTANT BEFORE DOING ANYTHING THAT AFFECTS PREVIOUS YEARS.

Hope this helps.

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If I registered for VAT in May 21, and had an expense in March 21, for: £100 £20VAT = £120 Do I show it (for Self ***** purposes Apr20-21) as 1) £120 2) £100 £20 VAT

If I registered for VAT in May 21, and had an expense in March 21, for: £100 £20VAT = £120 Do I show it (for Self ***** purposes Apr20-21) as 1) £120 2) £100 £20 VAT

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