I'm setting up a new business, and I'd like to keep a track of how much VAT I am paying on purchases, simply out of curiosity.
Is it possible / advisable to enter all the VAT transactions (on purchases only) and then simpy Journal the VAT out if, or when, I ever become VAT registered?
I am basically proposing use of the appropriate T(x) VAT codes but just leaving it in the Purchase Tax Control acct. and not doing a VAT return.
If you record your VAT on purchases you will end up overstating your profit. Much easier to set up an Excel spreadsheet to watch out much VAT you're paying out.
Yes that method could get messy because your total expenses wouldn't be accurate for each type of expense.
Perhaps you could print the nominal accounts at the end of the period and extract some figures from them to make the job easier? But of course you'd have to ensure all the entries in that particular nominal code are subject to VAT. Just a suggestion, I've not thought it through properly.
Why not just set up two purchases nominal codes, one for vatable purchases, one for not, post the expenses gross, then at the end of the month/quarter just divide the vatable nominal by 6 to find the amount of vat that you could have claimed? This is a simple way of giving you a good idea of what VAT you have paid out.
I would also bear in mind how much VAT you will have to pay if you are thinking of registering.
Nick
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Nick
Nick Craggs FMAAT ACA AAT Distance Learning Manager
