One of my clients has purchased items for the business from her own money and I usually post them to a supplier account and then repay her as a normal supplier. Due to cash flow issues at the moment, the business will not be repaying her for a while so I thought I would post the expenses to her DLA instead of to the supplier account for the time being. The business is on cash accounting for VAT purposes so would not reclaim the VAT until she was repaid. My question is this....as my client would argue that these purchases have already been paid for, can we not reclaim the VAT on these even though the business has not paid her back yet?
whatever the mechanics of the arrangement the fundamental situation is that the director has loaned money to the company which the company has used to purchase goods and the company is entitled to reclaim the VAT on such purchases.
I can see how confusion is coming into this due to the incestuous relationship between personal and company money and because the director purchases the goods it feels different but the reality is that the director has simply missed out the step of transfering the money to the company for the company to spend it although under the bonnet thats exactly what has happened.
As such, not only can the VAT be reclaimed but it would actually be wrong not to.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I find that this is one of those things that I have to sort out many times through the books as directors seem at times completely oblivious to the company credit card that they carry around with them.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
