General UK VAT accounting query (slightly OT)

[Maf. King]

On Thursday 10 Mar 2005 12:54, andy thomas wrote:

>
> I suppose VAT (VAT due, or our output tax) that is waiting to be paid to
> the government is a liability as it's not our money, we're collecting it
> for them (although I suppose we could even invest it to earn interest until
> it's due to be paid on). And the VAT we have paid our suppliers (our input
> tax) is a liability (although I thought liabilities were something we had
> charge of temporarily, like a loan, but had to pay back eventually?).
>

As I understand it, Output VAT (charged on your invoices, paid to you by your 
customers) is a liability, as it is really the government's money, you are 
just "looking after it".

Input VAT ( which you have paid to your suppliers) is an asset - in the same 
way as A/R is an asset - money which you don't have, but are entitled to.

Government assumes that you charge more than you are charged, and so you will 
always make payment to them (liability > asset), but a VAT refund is 
perfectly possible, if you have made a loss.   

>
> Not a problem as we have the original suppliers invoices, receipts, etc
> and the VAT is worked out on paper anyway. I'm not currently using gnucash
> for VAT although I'd like to start doing this.
>

The business features of GC are up to this task.  However, items which don't 
go through A/P A/R require a manual split of the VAT portion.
The only real problem I have had is with the Balance sheet report not quite 
showing things correctly (Can't remember exactly which way round, but I think 
my assets are shown as liabilities, so I have to manually/mentally move one 
line), which I intend to look at during April, to avoid fscking a whole 
year's data....

Maf.