Claiming back VAT on purchase invoices
Discussion
Scenario: Supplier A has issued a VAT invoice dated 20/01/2009 and Company B has settled the invoice via its corporate payment card. The card balance is settled on 20/02/2009. Company B’s VAT qtr ends 31/01/2009.
So the supplier has issued an invoice within the VAT qtr and received it’s funds, but the company hasn’t actually parted with any funds until after the VAT qtr has ended.
My question is; can the VAT element on the invoice be reclaimed within the VAT qtr ending 31/01/2009, or should it be in the next one? Cash accounting VAT scheme in operation.
Tim.
So the supplier has issued an invoice within the VAT qtr and received it’s funds, but the company hasn’t actually parted with any funds until after the VAT qtr has ended.
My question is; can the VAT element on the invoice be reclaimed within the VAT qtr ending 31/01/2009, or should it be in the next one? Cash accounting VAT scheme in operation.
Tim.
JagLover said:
Cash accounting means use the date the invoice was paid. The method of payment is irrelevant.
Sorry if I wasn't clear; asking question from the point of view of Company B claiming back VAT on invoice from Supplier A, not Supplier A paying VAT element to HMRC from it's invoice to Company B.JagLover said:
timskipper said:
JagLover said:
Cash accounting means use the date the invoice was paid. The method of payment is irrelevant.
Sorry if I wasn't clear; I don't care what supplier vat situation is, only when the company can claim back the vat on an invoice which by virtue of payment card due date spans two vat qtrs.
Eric Mc said:
I wasn't sure from who's point of view the question was being pitched.
Mine; or rather that of my company. For stuff I bought and paid for with my company mastercard in the current vat quarter, but which are not paid for with company funds until the mastercard payment is taken in the next var quarter. Can I claim back the vat in the 1st qtr or the 2nd?Hi Tim,
Here's my uninformed view.
Company A has the VAT, thus you have paid it - put it on the return.
A credit card is a loan, you paid the invoice + VAT with that loan, your agreement with the supplier of the loan (ie when you pay them back) has nothing to do with HMRC.
VAT paid, claim.
D.
This could be completely wrong by the way
Here's my uninformed view.
Company A has the VAT, thus you have paid it - put it on the return.
A credit card is a loan, you paid the invoice + VAT with that loan, your agreement with the supplier of the loan (ie when you pay them back) has nothing to do with HMRC.
VAT paid, claim.
D.
This could be completely wrong by the way

DonnyMac said:
Hi Tim,
Here's my uninformed view.
Company A has the VAT, thus you have paid it - put it on the return.
A credit card is a loan, you paid the invoice + VAT with that loan, your agreement with the supplier of the loan (ie when you pay them back) has nothing to do with HMRC.
VAT paid, claim.
D.
This could be completely wrong by the way
Well that's pretty much my view, but with HMRC and especially VAT - assume nothing! Here's my uninformed view.
Company A has the VAT, thus you have paid it - put it on the return.
A credit card is a loan, you paid the invoice + VAT with that loan, your agreement with the supplier of the loan (ie when you pay them back) has nothing to do with HMRC.
VAT paid, claim.
D.
This could be completely wrong by the way


Your company is VAT registered so is entitled to reclaim Input VAT on the goods and services it buys for the furtherance of its trade.
The company is entitled to reclaim the VAT as long as it has a proper VAT compliant invoice from the supplier showing the suppliers proper name, its VAT number and, if the items bought exceed £200, the VAT content of the transaction. The customer's address should also be shown on invoices not exceeding a VAT inclusive value of £250. If the invoice needed an address to be shown, as you paid for the goods personally, you should have ensured that the invoice was properly addressed to the business and not to you.
The VAT period in which the Input VAT can be reclaimed will depend on whether your company is oiperating under normal VAT rules or whether it is Cash Accounting for VAT. If "normal", the VAT qurter in which the VAT can be recovered will be based on the date shown on the supplier's invoice.
If operating the Cssh Accounting system, your company will make the reclaim based on the date the invoice was paid.
I think your question centres on what was the legitimate date of payment of the invoice. As you paid the invoice personally, as far as the company is concerned, that invoice remained unpaid until the cheque or cash was paid to YOU. However, it's a moot point as to what the VAT authorities would consider the Tax Point under Cash Accounting. In most circumstances, they would allow YOUR date of payment by you to stand as the company's date of payment on the basis that a loan account has been established at the point you incurred the expense on behalf of the company. Certainly, when a bill is paid using a company credit card, the date of "payment" is always considered to be the date of the credit card transaction, not the date of the clearing of the credit card balance.
Regarding how the supplier deals with the VAT on the transaction, normally they would declare the VAT on the sale in the VAT quarter in which the invoice was raised. If they are cash accounting, they would use the date of the cash receipt instead.
Please note that the reclaim in this case is not based on the fact that a credit card was used as the credit card was not a company credit card. It would be based on the fact that a company director/employree paid for it personally, irrespective of the method they used to pay the cost.
The company is entitled to reclaim the VAT as long as it has a proper VAT compliant invoice from the supplier showing the suppliers proper name, its VAT number and, if the items bought exceed £200, the VAT content of the transaction. The customer's address should also be shown on invoices not exceeding a VAT inclusive value of £250. If the invoice needed an address to be shown, as you paid for the goods personally, you should have ensured that the invoice was properly addressed to the business and not to you.
The VAT period in which the Input VAT can be reclaimed will depend on whether your company is oiperating under normal VAT rules or whether it is Cash Accounting for VAT. If "normal", the VAT qurter in which the VAT can be recovered will be based on the date shown on the supplier's invoice.
If operating the Cssh Accounting system, your company will make the reclaim based on the date the invoice was paid.
I think your question centres on what was the legitimate date of payment of the invoice. As you paid the invoice personally, as far as the company is concerned, that invoice remained unpaid until the cheque or cash was paid to YOU. However, it's a moot point as to what the VAT authorities would consider the Tax Point under Cash Accounting. In most circumstances, they would allow YOUR date of payment by you to stand as the company's date of payment on the basis that a loan account has been established at the point you incurred the expense on behalf of the company. Certainly, when a bill is paid using a company credit card, the date of "payment" is always considered to be the date of the credit card transaction, not the date of the clearing of the credit card balance.
Regarding how the supplier deals with the VAT on the transaction, normally they would declare the VAT on the sale in the VAT quarter in which the invoice was raised. If they are cash accounting, they would use the date of the cash receipt instead.
Please note that the reclaim in this case is not based on the fact that a credit card was used as the credit card was not a company credit card. It would be based on the fact that a company director/employree paid for it personally, irrespective of the method they used to pay the cost.
Edited by Eric Mc on Friday 30th January 08:30
Eric Mc said:
Please note that the reclaim in this case is not based on the fact that a credit card was used as the credit card was not a company credit card. It would be based on the fact that a company director/employree paid for it personally, irrespective of the method they used to pay the cost.
No I have a company credit card with which I pay for company purchases, no personal transactions have taken place here and no reimbursement is due to me in any way over this scenario I'm talking about.Edited by Eric Mc on Friday 30th January 08:30
Tim.
timskipper said:
Eric Mc said:
Please note that the reclaim in this case is not based on the fact that a credit card was used as the credit card was not a company credit card. It would be based on the fact that a company director/employree paid for it personally, irrespective of the method they used to pay the cost.
No I have a company credit card with which I pay for company purchases, no personal transactions have taken place here and no reimbursement is due to me in any way over this scenario I'm talking about.Edited by Eric Mc on Friday 30th January 08:30
Tim.
HMRC look on the payment by use of the credit card as a full and final settlement of the amount due to the supplier. That is why they take the credit card payment date as the operative payment date for Cash Accounting purposes. The day the credit card company account was settled is of no relevance.
Thanks Eric.
Ignoring VAT now, would the same be true if the two dates (payment of invoice & payment of card balance) crossed a financial year-end?
Would you count the card transactions made before year-end as expenses for the current year, or after since you've not actually paid out on them?
Tim
Ignoring VAT now, would the same be true if the two dates (payment of invoice & payment of card balance) crossed a financial year-end?
Would you count the card transactions made before year-end as expenses for the current year, or after since you've not actually paid out on them?
Tim
timskipper said:
Thanks Eric.
Ignoring VAT now, would the same be true if the two dates (payment of invoice & payment of card balance) crossed a financial year-end?
Would you count the card transactions made before year-end as expenses for the current year, or after since you've not actually paid out on them?
Tim
It is a general principle of accounting that income and expenditure is "logged" and "booked" in the financial records on the date the transaction was generated - not the date the transaction was cleared by payment or receipt of money. This is called the "accruals concept" and is absolutely fundamental to accounting.Ignoring VAT now, would the same be true if the two dates (payment of invoice & payment of card balance) crossed a financial year-end?
Would you count the card transactions made before year-end as expenses for the current year, or after since you've not actually paid out on them?
Tim
It is therefore assumed by all users of accounts (including HMRC) that this principle has been applied to the figures shown in a set of accounts.
Therefore, if you use a credit card to pay for business costs, all those business costs transacted on the credit card statements right up to the last transaction on the last day of the accounting year, should be reflected in the annual accounts.
For practical purposes, most book-keeping systems will generally process the last STATEMENT of the accounting year. This means that some transactions which happened in the accounting year may not be entered onto the system until the NEXT accounting year as they will be appearing on the first credit card statement of the next accounting year.
I usually review the first credit card statement of the next accounting year, summarise those transactions shown on that statement which related to the accounting year I am finalising and then provide a simple accrual in the accounts to make sure that those costs appear in the correct set of accounts.
Eric Mc said:
I usually review the first credit card statement of the next accounting year, summarise those transactions shown on that statement which related to the accounting year I am finalising and then provide a simple accrual in the accounts to make sure that those costs appear in the correct set of accounts.
This is effectively what I have been doing for the last nine years (or rather providing detailed to my Accountant, whom I have just sacked so can't really question over) but I was going through my accounting spreadsheets yesterday and these two issues started to niggle at me. Un-necessarily it seems!Thanks for your time Eric.
Tim
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