VAT on Covid JRS?

[Lemmonie]

I am reconciling the accounts and with regards to the JRS grant how are people recording that and is there VAT on it?

[Stay in Bed Instead]

It's a trading receipt and no VAT.

[Ham_and_Jam]

Lemmonie said:

I am reconciling the accounts and with regards to the JRS grant how are people recording that and is there VAT on it?

I recorded it in quickbooks under ‘other income’ with a memo ‘JRS Grant’, and it’s exempt from VAT.

[Eric Mc]

Definitely no VAT impact. However, it is not "VAT Exempt".

The reason why it is ignored for VAT purposes is because it is "Outside the Scope of VAT". That may sound pedantic but there are different reasons why no VAT might be calculated on a source of income -

Zero Rated
VAT Exempt
Outside the Scope

VAT Exempt income can have an effect on the amount of Input VAT you are able to reclaim. If you classify income as "VAT Exempt" on your software, depending on the software, you might find that you cannot reclaim all the Input VAT on your costs (known as Partial Exemption Rules in the VAT Regulations).

Also, if you classify it as VAT Exempt, it WILL show up as part of your VAT Outputs total in your VAT return. This is not correct. "Outside the Scope" income should never be included in the "Outputs" box of a VAT Return.

If you can classify it as "Outside the Scope", do that, as it is the more correct way of doing it.

[Ham_and_Jam]

Eric Mc said:

Definitely no VAT impact. However, it is not "VAT Exempt".

The reason why it is ignored for VAT purposes is because it is "Outside the Scope of VAT". That may sound pedantic but there are different reasons why no VAT might be calculated on a source of income -

Zero Rated
VAT Exempt
Outside the Scope

VAT Exempt income can have an effect on the amount of Input VAT you are able to reclaim. If you classify income as "VAT Exempt" on your software, depending on the software, you might find that you cannot reclaim all the Input VAT on your costs (known as Partial Exemption Rules in the VAT Regulations).

Also, if you classify it as VAT Exempt, it WILL show up as part of your VAT Outputs total in your VAT return. This is not correct. "Outside the Scope" income should never be included in the "Outputs" box of a VAT Return.

If you can classify it as "Outside the Scope", do that, as it is the more correct way of doing it.

You are correct. TBH wasn’t try to imply otherwise as it was just a quick reply from my mobile to help a fellow PHr.

From my perspective, it hasn’t been inputted as vatable or exempt or OOS. Just as other income, there isn’t an option to classify it in my version of Quickbooks desktop under that heading. It certainly isn’t picked up in the VAT report anyway.

[Eric Mc]

That's good.

Some software will pick up on VAT classification of a posting and try to put it into the appropriate area of a VAT return.

It's a grant against wages costs and it would not be wrong to offset it against "Wages and Salaries" rather than show it as a separate source of income.

The accounting for grant income allows grant income to be offset against the relevant expenditure.

[Lemmonie]

Thanks everyone thats really helpful.

I am using Xero so i will double the entry from a VAT perspective