How do I change my motoring expenses category to 50% of the VAT reclaimable (10%)? As the car is also used for personal use.
Currently my VAT submission would take the full 20% and I need it to be 10%...
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Please speak to a Tax Accountant about this, I've done some research online, unfortuantely this is not within my remit as technical support as there is not a default setting for this. The conflicting advice I've found online tells me you're best to speak to an qualified professional about it.
I have spoken to quickbooks support about this and they provided two possible solutions.
1) Make a journal entry - however this is simply about reducing the VAT you can reclaim on a car lease payment to 50% of the full VAT amount and it won't affect your expenses - so can't see how you would make this adjustment.
2) Make an adjustment on your VAT return before you submit to reduce the amount you can reclaim on purchases. This looks possible but it needs instructions on which account to put this against in quickbooks as adjustments are usually made to correct errors and it also confirms it will make changes to your journal and tells you to make sure you use the correct accounts!
I was also told to go and get advice from my accountant per the previous response to this. However, I am struggling to understand. The advice from any accountant and my own knowledge is clear - we just need to reduce the amount of VAT to reclaim by 50% on each monthly lease payment and make sure the return submitted correctly shows this.
As Quickbooks is MTD ready shouldn't this be available - so I see this as a technical query and not an accounting one. Presently you have to set the purchase VAT at 20% - which is correct as it is the amount paid but this then takes the full 20% amount off the VAT you are asked to pay HMRC - this is incorrect as only 50% can be claimed.
This must be affecting a significant number of people with lease vehicles paid by their company and who use them for personal as well as business use - they are either going to submit incorrect returns for their first MTD or are having to create their own work around.
Has anyone found a solution to this that works and they can share please or anyone from the quickbooks team can help. Surely it isn't the accountants job to work out how to use quickbooks to do this? Thank you.
Thanks for this Mark - summarised perfectly.
It should be setup for this exact scenario if it is indeed MTD ready, I'm with you - this will no doubt be a common occurrence which needs a solution (from QuickBooks) not a work around.
Just a further note Mark - if you add it as a Journal item, I'm told if the amounts are the same then it should line up with the expense. Though I've not actually tried that...
I wonder for now if tis possible to split the actual expense in 2 and apply one with a VAT rate and the other without?
I'll keep you posted with what I find.
A product specialist has given me a workaround - which I will check.
To use this create a new VAT tax rate in Taxes.
Add Tax Rate - Name it (e.g. VAT non-reclaimable)
Tick purchase box
Add tax rate 20%
Set the account to Expense (this should show just below as tax amount on line as N/A - i.e. it does not move this as a reclaimable amount into box 4)
Set last box as Net Amount on Purchases
Then for your lease payment - split it into two equal amounts. Apply the usual 20% on purchases rate to one and the newly created rate to the other.
This should mean that you will still see the full 20% shown on expenses and the purchases full amount is shown on your VAT return BUT the 50% of VAT from your new rate is not added to box 4.
Because I am having to undo already reconciled transactions it was fiddly. I did it and the expenses are showing as correct but I seem to be out be a tiny amount reconciling VAT on purchase (but very close so it may be something else).
Let me know if this might be a solution for you and if you try it - did it work?
Cheers for this,
I've added the tax code and will await the monthly lease payment to come out and check then via the VAT sheet. No reason why it shouldn't work though and seems a much more simple approach.
Has quickbooks got any further on best practice for this issue since they last post in 2019. There must be a straightforward way to post this VAT restriction as it must be a common bookkeeping issue for numerous quickbooks users.
That works and accounts for the correct VAT amount payable on the return in box 4. BUT it then under reports the net cost of purchases figure on the vat return, so a bit of a fudge all around. Quickbooks software should be able to deal with this.
Hi SteveYPF, This solution seems to work perfectly according to what I can see and does correctly calculate VAT reclaimed and net value of purchases. (I temporarily posted the invoice into a future unused quarter so I could run a VAT 100 Report to check.)