I have recently been asked to take over a business account and bring it up to date. The accounts was managed by a person who literally learnt on the job by trial and error, and in the most part has left things pretty messy.
Its a business that provides services, they also charge their clients expenses and they are VAT registered. So their typical invoice looks thus:
Invoice No:xxxx
Work done on 01/01/2012 - 1,000
VAT(20%) - 200
1,200
Expenses 530
1,730
All transactions were recorded on excel and I am required to move them into Sage.
Considering the fact that on the invoice, only one part has VAT applied and the other part hasnt. How do you do this transfer?
The pro-forma sage-import spreadsheet only has column for NET AMOUNT & TAX AMOUNT; how do I factor in the expenses into the Net and the VAT without creating an inbalance in posting.
When the customer pays the business, it pays the total sum owed (1,730). How do you match receipts & invoices if 1,730 was posted in the first place cos of the Non- VAT & VAT elements.
Please has anyone come across this before, I would appreciate advise on how they handled it.
I can't answer for what will happen if you import from Excel however if you were to batch process the invoices via Customer/Invoice, providing you use the same reference in both rows, you can split the entries between vat T1 and zero T0 and the invoice will appear as 1 total amount in the customers account
Alternatively if you're moving the accounting onto Sage then do the invoicing in Sage = more time saved. It's just a case of setting up the invoice template in the first place. Modules/Invoicing
The only time posting the cash received could affect the split of T1/T0 would be if they are on cash accounting ? Otherwise just allocate total received to invoice
On a separate point have you checked the HMRC rules on recharging expenses to make sure they should actually be zero rated ?
I thought about separating the entries into T1 and T0 on the import spreadsheet Template to Sage. But what that means is that it will be hard to allocate the receipts from the client to the amounts on the invoices posted. The business operates a cash accounting and the clients pay a whole sum into the bank account.
Even if the expenses have hidden VAT in them, the fact that the total sums are charged to the client (as per my example invoice) means the client is paying for the expense. So it will be wrong (i suppose) for a company to reclaim this VAT because it will be unfair to the client paying for it. In future, I intend to analyse the expense as well to separate its VAT elements(which is what i believe would be the right thing to have been done in the first place).
The key point is, as gillyfleur mentioned, whether it's correct for VAT not to be charged by your client when they recharge expenses. Unless the expenses meet the definition of a disbursement, then your client should charge VAT on both their services and the recharged expenses, even if the expenses would normally be zero-rated or exempt items in their own right.
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Pearce & Co - Chartered Accountant and Chartered Tax Adviser
