VAT excempt servics & sage Instant accounts

[Digger2054]

I am looking at using Sage Instant accounts to manage my finances for a newly established company.

The business will provide mainly VAT excempt services. However, I will be purchasing items at standard rate, which will be used to provide the services. I assume these items I cannot reclaim VAT on.

However, I will be making some large purchases of equipment, and using alot of petrol in connection with the business which the VAT will be recoverable from HMRC.

How do I go about entering such purchases into Sage instant accounts?

The Items I pay VAT on that are not recoverable appear on the VAT return that I can recalim it. :|

Do I enter the purchases I will not be reclaiming the VAT on, with a different tax code?

Any help much appreciated.

[David Griffiths]

You might not be able to claim the VAT on the equipment, or on the fuel, if it relates to exempt supplies. What percentage of your sales is going to be exempt and what is going to be taxable?

You are going to have to do a partial exemption calculation, and that's not for the faint hearted. I'd suggest that you take professional advice on this

[Digger2054]

I am going to be providing proffesional Embalming services to the funeral industry, on a freelance basis.

Looking at HMRC website this service is excempt. (as is most of the funeral industry)

However speaking with an experienced funeral director, he's mentioned it may be beneficial to get VAT registered.

I will be driving between different companies to provide the service. ( I will not charge for mileage, as this is covered in a flat rate service charge for each case)

I was under the understanding that I will be able to re-claim for:

Petrol used traveling between each job
Equipment- Ie: pumps, needles, computer, software

I would not be entitled to re-claim VAT on:
Chemicals & Cosmetics - used in the embalming process

I am not expecting to go over the threshold where I need to register, but it may be worth it to re-claim on the large purchases and expense of fuel.

[David Griffiths]

If you aren't making any taxable supplies then you won't be able to recover any of your VAT

[Digger2054]

Thanks for the advice.

That's that solved then :)

With regard to keeping accounts, I will not need to keep the VAT records as I would if I was registered?

[Figurate]

If you're not going to be registered for VAT, you would use the T9 code for everything in Sage. You won't need to separate the net & VAT. Just use the gross figures (including VAT).
You'll still need to keep decent records for your accounts and corporation tax.