I am the Bookkeeper for a Letting Agency.I have set the tenants up as my Customers and the Landlords as my Suppliers.Each month I import all the tenants rent as SI's and PI's to the Landlords with PC's as our commission.I then send a remittance out to the landlords with the payments made to them.This has always worked well - until now !
I have just had to register for VAT and, for the life of me, I cannot work out how to account for this.
As the rent is VAT exempt it is only VAT on the commission that I have to charge.
If I put the VAT on the SI's then the tenants look like they have to pay too much rent.Their rent should not change but if I put it on the PC for our commission then the VAT will go into the Purchase Tax Account and not the Sales Tax Account, which it should be.
Also the remittances that I now send does not show the breakdown of Net & VAT and the Landlords will need to see this for their returns.There are far too many remittances being sent to be able to manually create a remittance for each one.
Anyone got any ideas to save me another sleepless night?
Hi Sue, I can't answer your questions, but it seems to me that your set up isn't right.
We like new posters to tell us a bit about themselves first, background, experience, training, qualifications (QBE is fine) It helps us to pitch the answers at your level, rather than talking down to you or it going straight over your head.
Welcome to the forum.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
As John says, that doesn't sound like the right approach at all - especially if you're now VAT registered.
And to add to the information he's suggested you post, I'd suggest a couple of other key ingredients we need: The software in use, and the VAT scheme you are using.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
Its vyer easily fixable and a common issue to sort, but we do need the intro and info requested. Helps us to pitch answers and provide software specific answers.
We always ask newbies!
To expand on what John has said the line is usually asking for the - what prof body do you belong to, do you work for yourself or in a practice/ firm, are you a bookkeeper or accountant, what qualifications, how long in role, where up to in your studies-what exams passed/with what body/in midst of doing, where based, what you did before this role? That sort of thing.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I work for a lettings agency. I do a customer invoice to the tenant for the full amount of the rent. I use QuickBooks so the VAT code I use is O as it is out of scope. The rent is the landlord's money being collected by the letting agent on their behalf. I then do a supplier invoice from the landlord to the lettings agent for the full amount of the rent with O and then another line with the commission with S for standard rate VAT. That results in the net amount due to the landlord. QuickBooks doesn't allow us to print out anything pretty so the letting agent does the remittances manually in Excel. You're right about the VAT going to the wrong account. When I do the VAT return, I download the detail report into Excel and move all of the commissions back up to box 1. ie deduct them from box 4 and add them to box 1. It's really fiddly but it does work.
I work for a lettings agency. I do a customer invoice to the tenant for the full amount of the rent. I use QuickBooks so the VAT code I use is O as it is out of scope. The rent is the landlord's money being collected by the letting agent on their behalf. I then do a supplier invoice from the landlord to the lettings agent for the full amount of the rent with O and then another line with the commission with S for standard rate VAT. That results in the net amount due to the landlord. QuickBooks doesn't allow us to print out anything pretty so the letting agent does the remittances manually in Excel. You're right about the VAT going to the wrong account. When I do the VAT return, I download the detail report into Excel and move all of the commissions back up to box 1. ie deduct them from box 4 and add them to box 1. It's really fiddly but it does work.
We were waiting for the customary intro before responding but the poster has not been back on since.
Is it out of scope? Or exempt? There is no mention as to whether this is resi or commercial, although the OP does mention exempt so we can only assume she is talking about resi at this stage.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
As it looks like the OP not coming back (must have liked those sleepless nights lol) I'd like to turn this into a general query.
Should the rent be even touching the accounts? My understanding is that rent is paid into a client account then paid over to the landlord, with commission deducted and transferred into the current account of the lettings agent.
I might have an internal accounts system that allows me to raise the necessary invoices but I would avoid VAT on it completely.
My external accounts would show income received from commissions and any repairs carried out plus of course the ridiculous amounts they charge for tenants when taking out a tenancy and only account for the VAT there.
When Sue raised the question one of my first thoughts were, have they reached the VAT with turnover including rents or was it just on ordinary lettings income.
I should state I've never done rentals so it maybe different in the real world, these are just my thoughts. I did tentatively look into it when I was briefly dabbling in People for hire as I saw a request for a bookkeeper to do this, but read that ideally you should be using specialist lettings software so stayed clear.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Indeed - it's the same caveat here of having no real experience or knowledge of this specific area, so I'm not going to comment on the overall set up, just the two issues being questioned by the OP.
Firstly, by using purchase credits, Sage will treat the VAT as (minus) inputs instead of outputs. They need to be sales invoices to the landlords, with a contra payment/receipt posted to offset them against the purchase invoices.
Secondly, the remittances not showing VAT: I'm not sure off hand if remittance advices can be tailored to show the VAT element of a payment - I suspect not, but ICBW. Here, the best solution is to send those commission sales invoices to the landlord, with appropriate wording about the way they are 'paid', and the remittance advices showing both the purchase invoice and the commission sales invoice.
Whether that will make sense to the OP or will need further explanation is anyone's guess, given that we don't know her level of experience etc.
-- Edited by VinceH on Saturday 29th of July 2017 05:43:21 PM
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
Thank you everyone I am reading your posts and I have now solved the problem.
I am using a process similar to Princess above has described and that seems to work well. I am raising sales invoices and purchase invoices to the same value for the rent with T9 tax code and then another sales invoice for the landlords just for the commission but using T1 tax code to calculate the VAT.
As for updating my details they have all been updated and I can't add any more (except for my profile picture). It is all showing on my account except for my area address but when I enter that I get a message saying "Request Denied". My area is Newquay, Cornwall.
There is clearly some confusion here as you were not asked to update your profile details but to provide a professional background update (see the wording which John and I talked about and to which Vince alluded in his latest response!) which can be completed in the same boxes you have just typed your answer eg at 18.17 or indeed can actually be done so it shows in the biography section on your profile. We ask for that so that we dont either talk down to you or indeed talk above your head with answers.
In addition when we ask for software information we need specifics (so in this case sage can mean lots of different types - cloudy nonsense, sage 50, 50 pro, 200 etc and there are a million and one versions - some versions allow more complex entries than others) - so if you can go into the 'About' section (top of your screen on the right) and click on that you can advise the sage type and version.
Or not
-- Edited by Cheshire on Saturday 29th of July 2017 08:22:14 PM
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
