Should Expense Amounts Inclusive of Tax have the VAT Reclaimable box ticked by default? I understand this is an HMRC requirement to accurately report box 7.

Thanks for dropping your concern and knowing our system's VAT defaults, @InspectorTom.

To confirm, are you referring to the Amounts are box when creating an expense or a bill? If so, yes, the Inclusive of Tax is the system's default VAT option to reclaim taxes. Please know that you can select other tax options by clicking the drop-down arrow whenever required by the HMRC to change it.

However, if you're referring to the Inclusive of VAT box in the Products and services set up, this is not a system default choice. You can untick this box if it is not required by the HMRC.

I'm adding these articles for your reference in the future if you want to report and check the boxes in tax returns:

• VAT: Getting Started
• Submit a VAT return in QuickBooks Online

I'll keep my notifications open. If you have other concerns about setting up VAT in QuickBooks, please tag me (@Jovychris_A). I'm looking forward to assisting you more. Take care.

Thanks for the prompt reply and sorry my question wasn't clear as I didn't include a screenshot, hopefully this better explains what my words can't:

Both screenshots taken from the expenses detail, the second showing the contents of the local help tip which I believe is quite misleading as I think this box should be ticked be default regardless of whether its for a capital item valued over £2k!

Hello @InspectorTom,

Thank you for providing screenshots of the VAT Reclaimable box in QuickBooks. Allow me to chime in and provide clarifications regarding the local help tip.

The possibility of the VAT portion being reclaimed back from HMRC depends on the purpose of the actual purchase. If the VAT on expenses is only partially recoverable, the VAT is charged in full, and subsequently, the recoverable amount can be reclaimed at a later date.

That's the reason why users have the option to either tick the VAT Reclaimable box or not. For the local help tip, the system is referring to a single purchase of capital expenditure goods where the amount of the purchase, including VAT, is £2,000 or more.

No VAT is claimable if the supply is:

• more than 1 purchase
• under £2,000 including VAT
• of services

To learn more about it, please refer to this link (scroll down to 15. Capital expenditure goods:( VAT Notice 733: Flat Rate Scheme for small businesses.

I've also attached an article you can use to learn more about VAT filing frequency, like what you can do if you expect to reclaim VAT regularly: VAT: Getting started.

Feel free to hit that Reply button if you need more help entering expense transactions or using the VAT Reclaimable option. Have a great day ahead.

Thanks for this explanation, so I know understand why that help tip refers to capital expenses over £2k which can be claimed outside the FRS calculations.

I remain confused about how to automatically include the Box 7 expenses that include VAT and Box 4 which is limited as denoted by the help message.

As far as I could see from the last return made last week, the only way to fill box 7 was to tick that box. 

I must admit I wasn't aware that VAT was reclaimable under FRS for capital expenses over 2k so I might bring forward that expenditure!

Hello there, @InspectorTom.

As mentioned by my colleague AlcaeusF, no VAT is claimable if the supply is more than 1 purchase, under £2,000 including VAT, and of services.

To ensure if you need to reclaim VAT or not, I recommend checking with your accountant or HMRC, so there'll be no issues when the VAT audit comes. 

For more information about managing your VAT returns, here's a great article you can refer to: Submit a VAT return to HMRC - MTD for small businesses.

I'll be around to help if both of you need anything else. Feel free to leave a comment below. Have a good day.

Thanks @MirriamM 

I understand the rule concerning reclaimable VAT for capital expenditure over £2k as this is needed for box 4, but in any case I need to complete box 7 which is for all VAT expenses regardless of claims.

Without this number it's difficult to see whether it's worth continuing to use the FRS method for VAT calculations.

Hi InspectorTom, when you select 'Prepare return' you should see a final line for Gain/Loss by FRS which will either be a negative (loss) or positive (gain) number, to help you easily see if the scheme is working for your business. As per the FRS, purchases are not recorded and only capital assets costing more than £2000 that have been marked as reclaimable will appear in box 7. :)

Thanks @GeorgiaC 

I agree! The problem is that this number needs the current expenses for taxable items to be shown in Box 7 to make this calculation.

According to https://www.gov.uk/guidance/how-to-fill-in-and-submit-your-vat-return-vat-notice-70012

3.8 Filling in box 7

Box 7 the total value of purchases and all other inputs excluding any VAT

Show the total value of your purchases and expenses but leave out any VAT.

I think it would be easier to manually count the number of reclaimable capital expenditures over £2000 than to count up every other expense where VAT was paid although this appears to be a requirement of HMRC in addition to box 4.