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Level 1

Pre Registration VAT Reclaim Question - Adjustment Account?

Hi All,

 

I am about to file my first VAT return and am having a wobble regarding the VAT purchases I am reclaiming prior to registration and would really appreciate someone casting their eye over my logic and saying looks ok or Woooaaah you have lost your mind.

 

The VAT I am reclaiming from the period prior to registration will leave me with a VAT liability once offset against the current periods VAT due for this return.

 

So for illustration my VAT liability for the current period is £8K and I am reclaiming £3k for the period prior to registration and expecting a VAT liability to hand over to HMRC of £5k.

 

So I proceed to adjust Box 4 on the return to reflect the amount I am reclaiming as £3K  

 

So far so good.

 

Having read as everything I can find for the adjustment account to select I have set up an adjustment account solely for this purpose which is an income account.

 

Once the adjustment is made VAT control reflects the correct amount leaving my overall VAT liability as I expected in VAT control.

 

The reclaimed amount is posted to the P&L via the adjustment account I set up for this purpose.

 

It is this last point that is making me question my sanity as the reclaimed VAT is posted to the P&L (as you would expect as I set up the adjustment account to do this) but I am not able to convince myself that this is the right and correct way to do it and finally hit the submit return button although I cannot fathom a different way to achieve the correct result either!

 

Appreciate anyone that has the time to give this the once over

 

Thank you