Sales Tax/VAT paying it

[Maf. King]

On Monday, 14 March 2016 22:56:12 GMT John Whitmore wrote:

> What is a bigger deal is that I've been paying Vat to the government 
and
> doing it wrong. I've been paying it but registering the money in an
> expenses:Vat account. That's obviously wrong and I should be paying 
the vat
> and having it clearing the Liability:Vat account.
> 
> Could somebody possibly confirm that. On the face of it Sales Tax/Vat is 
as
> simple as, but it could use a few pages in user guide for us slow people.


Hi John.

Confirmed.  paying VAT in GC is recorded as a split transaction, whereby 
the liability of Output VAT (box 1 or 3 on the UK return) is partly offset by 
clearing the asset of input VAT (box 4) and making up the difference from 
the bank account.

fundamentally, the Asset/Liability accounts should be cleared to 0, and 
your bank account should go down :-( as required (by HMRC!).

Paying VAT isn't an expense to the business - it was never your money, 
you merely "looked after it" for HMRC for a while.

Sounds like you are on cash accounting for VAT, while the GC invoice 
system assumes accrual - as you say an extra complication to deal with....

HTH,
Maf.