Hi I have bought an item on HP and have paid all the vat upfront. I have put this payment on to QB as a supplier but am now unable to change the vat element to represent 100% of the transaction. Please can anyone help
VAT is not chargeable on loan interest, only on goods and services. This item is presumably a fixed asset that you are financing with the HP agreement.
Assuming that to be the case, then the correct accounting entries are as follows:-
Fixed Asset (DR) Net (of VAT) cost of asset
VAT Control (DR) VAT relating to asset
Interest Debtor (DR) with total interest for the loan.
Loan Account (CR) Total cost (including VAT and interest) of the asset.
Hi JBee.
This is more of a follow up than a solution. I am also having the same issue that you were having. I also seem to be struggling to input a full VAT figure.
Any Help would be greatly appreciated.
Regards
Martin Walker
The VAT charge will always be at the standard rate and applied to the asset in this case. Interest charges are classed as exempt for VAT. Quick Books can easily post the correct entries if you enter each element of the transaction on a separate line of the entry form.
Hi
Thanks for trying to help me out on this. Here are the figures. I made a purchase valued at £40,000 plus vat. I paid an initial deposit to the supplier of 25% - £10,000. my next payment was to the finance house which was for £8,000. This payment was all of the vat for the whole purchase of £40,000. this is the payment that I am struggling with because it is 100% vat. I understand that sussequent payments include interest but carry no vat.
Any ideas? It looks like Martin is in the same position
Regards
John
The principle is very similar to that employed when handling VAT on imported goods.
In your case, you should do the following:-
DR Fixed Asset with the VAT exclusive value of the purchase. (£40,000)
DR VAT control with the VAT (£8,000)
CR Loan Account (£48,000) being the total of the Asset + VAT.
When you paid the initial instalment (deposit) the following would be the posting:
DR Loan Account (£10,000)
CR Bank Account (£10,000)
Then the payment to the Finance House for the VAT will be:-
DR Loan Account (£8,000)
CR Bank Account (£8,000)
This will leave a balance on the loan account of £30,000
Then when you start paying the loan, each instalment will comprise the following posting:
DR Loan Account
DR Loan Interest (P&L) with the periodic interest
CR Bank Account.
Hope this helps.
Enter bill for item Edit Vat box to include the full vat paid.
The vat will be posted in full correctly just memo the transaction can be done when you purchase the asset.
QB 2008 and higher versions only.
