Handling reclaimed VAT

Question on VAT returns.

When a VAT return is submitted to HMRC, input VAT is deducted from Output VAT. What happens to the leftover VAT in the company and how should it be treated in terms of funds available to the company ?

So if you have 2000 in Sales VAT, and deduct 400 in Input VAT, you remit 1600 to the HMRC - what do you do with the 400 leftover ?

[TestMangler]

Spend it :-)

[Craig@Clarity]

Question on VAT returns.

When a VAT return is submitted to HMRC, input VAT is deducted from Output VAT. What happens to the leftover VAT in the company and how should it be treated in terms of funds available to the company ?

So if you have 2000 in Sales VAT, and deduct 400 in Input VAT, you remit 1600 to the HMRC - what do you do with the 400 leftover ?

There is no £400 left. What actually happens is that you collect and pay over £2000 in output VAT and at the same time reclaim back £400 in input tax.

[mavster07]

There is no £400 left. What actually happens is that you collect and pay over £2000 in output VAT and at the same time reclaim back £400 in input tax.

Err, No.....only 1600 was paid........2000 was billed and collected in sales....

[SueEllen]

Err, No.....only 1600 was paid........2000 was billed and collected in sales....

What VAT scheme are you on?

[mavster07]

standard

[SueEllen]

standard

Unless you mucked up the calculation (which is done automatically) the answer is thus -

There is no £400 left. What actually happens is that you collect and pay over £2000 in output VAT and at the same time reclaim back £400 in input tax.

[Craig@Clarity]

Err, No.....only 1600 was paid........2000 was billed and collected in sales....

I know I was giving you the technical answer. The reality is what you've paid in the example is correct (£1,600) but technically its the process of paying over the Output and reclaiming the Input, thus only actually handing over the difference between the Output and Input. You haven't actually gained an extra £400.

[mavster07]

I know I was giving you the technical answer. The reality is what you've paid in the example is correct (£1,600) but technically its the process of paying over the Output and reclaiming the Input, thus only actually handing over the difference between the Output and Input. You haven't actually gained an extra £400.

Confused.

According to my figures, my 2000 in sales VAT is remitted to HMRC minus the 400 in input VAT. So what happened to the 400 collected that wasn't given to HMRC ?????? where did it go and how is it treated ? the 2000 wasn't mine to begin with until the nett amount is calculated...

[Craig@Clarity]

The £400 goes towards reducing your original expense in the company. e.g. if you bought a company computer for £2,400 inc. VAT you would reclaim the £400 as mentioned from the VAT man. This £400 input VAT would then be offset against the cost of the computer so that ultimately the cost of the equipment to the company would be £2,000 (£2,400 - £400).

Hope this helps.