Seeing that Hire purchase and lease purchase transactions are excluded from Cash basis, is there any way of entering transactions in Sage in order that the return is correct?
Or, is is just a matter of manually adjusting the VAT returns - i.e., Adding in all the VAT for the first return and subtracting VAT included in future monthly payments?
The simplest way is to treat the HP agreement as a bank loan account:
Post the invoice for the purchase of the item being bought on hire purchase as a supplier invoice
Set up a bank account to represent the HP account (the 'loan')
"Pay" the invoice from that account
Since the invoice has now been paid as far as the accounts software is concerned, the VAT is dealt with on the return for that quarter.
For repayments, you should either:
Post the capital element as a transfer from the real bank account to the HP bank account, and the interest element as a payment from the real bank account to the relevant cost code for HP interest
Or, Post the full amount as a transfer from the real bank account to the HP bank account, and the interest element as a payment from the HP loan account to the relevant cost code.
If, over time, you have multiple items bought on HP agreements, you can repeat the exercise with a bank account for each agreement.
However, you don't necessarily have to create a new bank account for each - you can use the same one, but if you do make sure you control it properly. Use a separate spreadsheet to keep a track of the items you have, their individual balances, etc - at any given point in time, the total balance on your spreadsheet should match the balance on the bank account.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
I didn't think you were answering my specific query (about VAT) at first, but I see that it does answer the question!
I thought that there may have been a way within the accounts software to mark a transaction as a specific type of VAT policy (i.e., standard rather than the cash accounting method which is set up for this company) but probably not! It is a shame as it is an HMRC exception to the cash basis rules although your method does seem to help deal with this.
I don't suppose many people on here have clients that often on VAT cash accounting and even less that have this and hire purchase agreements, so great to get a helpful reply. For those that do, it is handy to know that you can claim all the VAT on such agreements even when using this VAT method which may help someone dow the line!