Recording rental income

[Tigris]

Hey,

i've just started using Quickfile to record rental income.

When the estate agents send over the money, they send over the rent minus their cut. Some months there is also repair payments for certain trades such as plumbers etc.

Should I be recording the total income as well as showing all deductions for each trade?

In the past i've just recorded the net amount which ends in the business bank. I know there are tax deductions to be had but surely not if the money never entered the back account in the first place?

Cheers.

 

[Newchodge]

I would record it all - set up the estate agent and each tradesman as a supplier and enter all the details. What happens about VAT?

 

[Tigris]

I would record it all - set up the estate agent and each tradesman as a supplier and enter all the details. What happens about VAT?

Thank you.

I'm not VAT registered?

 

[Newchodge]

Thank you.

I'm not VAT registered?

No, but some of your suppliers may be, so the agent invoice should show VAT. As you're not registered, you cannot do anything about it, but, as a business you should know if you have been charged VAT.

 

[DWS]

No, but some of your suppliers may be, so the agent invoice should show VAT. As you're not registered, you cannot do anything about it, but, as a business you should know if you have been charged VAT.

No, but some of your suppliers may be, so the agent invoice should show VAT. As you're not registered, you cannot do anything about it, but, as a business you should know if you have been charged VAT.

Why? If they are not VAT registered what does it have to do with anything?

 

[Newchodge]

Why? If they are not VAT registered what does it have to do with anything?

I believe that knowing all available information helps to make decisions. For example, further down the line the OP may want to consider VAT registration. If none of the suppliers is VAT registered, that may have a bearing on the decision. If the information is there on the invoice, why not record it?

 

[Ziggy2024]

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If it is residential income then there it will be exempt so VAT isn't an issue but the principle is correct.

You need to separate the expenses from the income and show these separately on your bookkeeping / tax returns. The income needs to be the gross amount.

 

[DWS]

I believe that knowing all available information helps to make decisions. For example, further down the line the OP may want to consider VAT registration. If none of the suppliers is VAT registered, that may have a bearing on the decision. If the information is there on the invoice, why not record it?

Record it how?
Are you really suggesting that every non VAT registered business should account for any VAT on receipts in their bookkeeping and then what? add it back to do the accounts?
Crazy idea!

 

[numbersrule]

Record it how?
Are you really suggesting that every non VAT registered business should account for any VAT on receipts in their bookkeeping and then what? add it back to do the accounts?
Crazy idea!

The OP sounds like this may be long term residential lettings which are not in scope for VAT ( currently ).

Supposing the Chancellor decides to bring long term residential lettings in scope for VAT sometime in the future?

In that scenario it would be useful to have VAT data available to understand the position.

In any event, the principle is correct in that Accounts should always show Total Income and Total Expenditure and not some 'netted off' version of lesser income and expenditure.

The way I would record this in the current situation is to enter the expenditure items as Bills in QuickFile with the amount shown as the Gross Amount including the VAT but record it as No VAT, because the business is not VAT Registered. Then I would attach a PDF of the Bill to the Bill in QuickFile as the correct financial record.

Another reason that Total Income and Total Expenditure should be recorded correctly is so that the business owner can understand which year they need to register for Making Tax Digital for Income Tax because the applicability of MTD for IT is based on 50k, 30k and 20k bands of Income for the next 3 years.

 

[DWS]

The OP sounds like this may be long term residential lettings which are not in scope for VAT ( currently ).

Supposing the Chancellor decides to bring long term residential lettings in scope for VAT sometime in the future?

In that scenario it would be useful to have VAT data available to understand the position.

In any event, the principle is correct in that Accounts should always show Total Income and Total Expenditure and not some 'netted off' version of lesser income and expenditure.

The way I would record this in the current situation is to enter the expenditure items as Bills in QuickFile with the amount shown as the Gross Amount including the VAT but record it as No VAT, because the business is not VAT Registered. Then I would attach a PDF of the Bill to the Bill in QuickFile as the correct financial record.

Another reason that Total Income and Total Expenditure should be recorded correctly is so that the business owner can understand which year they need to register for Making Tax Digital for Income Tax because the applicability of MTD for IT is based on 50k, 30k and 20k bands of Income for the next 3 years.

I am not taking about recording the suppliers invoices, yes obviously they need recording along with the gross income.
I am questioning the VAT element, there is no need to mention this anywhere as it has no bearing on the accounts.

 

[numbersrule]

I am not taking about recording the suppliers invoices, yes obviously they need recording along with the gross income.
I am questioning the VAT element, there is no need to mention this anywhere as it has no bearing on the accounts.

Yes, I know what you mean.
If Tigris wishes to completely ignore the VAT then they can uncheck the 'VAT Registered' option in their settings. That way VAT is completely excluded from all transactions and thereby avoids accidental errors with VAT.
But I still agree with Newchodge that it makes sense to keep a copy of all Purchase Invoices with VAT on in case they are needed in the future.

 

[DWS]

But I still agree with Newchodge that it makes sense to keep a copy of all Purchase Invoices with VAT on in case they are needed in the future.

You need to keep copies of all the purchase Invoices anyway whether they have VAT on them or not!

 

[MyAccountantOnline]

...

Should I be recording the total income as well as showing all deductions for each trade?

....

Yes

 

[Paul Kelly ICHYB]

Crazy idea!

I don't think it is.

Setting up a cost code of unregistered VAT will allow you to see what your potential VAT costs would be, which, when approaching registration levels or if you have high VATable costs, can help make good business decisions.

On the original question, you should record all of the transactions, not just the net payment. VAT registration is based on gross turnover, not net!

 

[DWS]

I don't think it is.

Setting up a cost code of unregistered VAT will allow you to see what your potential VAT costs would be, which, when approaching registration levels or if you have high VATable costs, can help make good business decisions.

If you want to waste time and money on something that the business may never need then carry on.
As I said crazy idea!

 

[Paul Kelly ICHYB]

If you want to waste time and money

How? It is adding another line when entering an invoice into your accounts system - a few seconds.

 

[JEREMY HAWKE]

It would be best to treat this as a proper business and follow the full instructions that the usual suspects are giving here

To many people think its a passive income and dont take property investments seriously enough

 

[DWS]

How? It is adding another line when entering an invoice into your accounts system - a few seconds.

So just to be clear here, you are advising that every business that is not VAT registered should account for it anyway just in case they may want to register in the future?
Are you honestly suggesting that?

 

[Paul Kelly ICHYB]

Are you honestly suggesting that?

No.

I suggest that if you have a business that might go over the registration limit or has high costs/low margins, keeping a record of what the VAT implications might be is not a bad thing.

However, especially with MTD requirements, doing this with accounting software might not be a bad thing either.

 

[DWS]

No.

I suggest that if you have a business that might go over the registration limit or has high costs/low margins, keeping a record of what the VAT implications might be is not a bad thing.

Well that could be said for plenty of different scenarios, you can not account for all of them on the chance they may happen, sometimes a small business needs to concentrate on actually earning money.

 

[Tigris]

Cheers for the replies.

Just split the payment in Quickfile so i've got the full rental income shown minus repairs and the management fee. This has done the journal entry which all matches up but if I go into Customers/Suppliers the amounts don't show as invoices for incoming or suppliers for outgoing?

 

[Newchodge]

Cheers for the replies.

Just split the payment in Quickfile so i've got the full rental income shown minus repairs and the management fee. This has done the journal entry which all matches up but if I go into Customers/Suppliers the amounts don't show as invoices for incoming or suppliers for outgoing?

How would an invoice show if you havent entered one?

 

[Tigris]

How would an invoice show if you havent entered one?

Is the journal entry enough for the records?

I've gone to the banking section which shows the incoming payment received from the estate agents. Then when splitting the payment (enabling me to record total rent minus repair/management fees) it just adds it as a journal entry.

 

[Newchodge]

Is the journal entry enough for the records?

I've gone to the banking section which shows the incoming payment received from the estate agents. Then when splitting the payment (enabling me to record total rent minus repair/management fees) it just adds it as a journal entry.

What happens to your expenses in the chart of accounts when you do that?

 

[Tigris]

What happens to your expenses in the chart of accounts when you do that?

My chart of accounts isn't showing any figures? (In quickfile)

 

[Newchodge]

I think you should start by breaking down the invoice from the agent and entering supplier amounts for each supplier. Don't use a journal entry at all.

 

[Tigris]

I think you should start by breaking down the invoice from the agent and entering supplier amounts for each supplier. Don't use a journal entry at all.

Thank you, have done that. Also done an invoice for the tenant for the full amount.

I did only receive 30% of the total rent this month due to repairs. The tenant has paid so the invoice needs marking as paid. Also need to figure out how to show the 4 suppliers as paid as well.

 

[Ziggy2024]

Cheers for the replies.

Just split the payment in Quickfile so i've got the full rental income shown minus repairs and the management fee. This has done the journal entry which all matches up but if I go into Customers/Suppliers the amounts don't show as invoices for incoming or suppliers for outgoing?

This is fine for a rental business. Cash basis is the default so using the bank to process the incoming & outgoings will suffice.

You can do it accruals basis by posting supplier invoices but you don't need to, just keep a copy of them.

Check your profit & loss, if you have posted the transaction correctly it will show there.

 

[Tigris]

This is fine for a rental business. Cash basis is the default so using the bank to process the incoming & outgoings will suffice.

You can do it accruals basis by posting supplier invoices but you don't need to, just keep a copy of them.

Check your profit & loss, if you have posted the transaction correctly it will show there.

I usually just allocate the money landed in my bank under the tenants name (as a customer). I then attach a copy of the invoice from the estate agent which shows a breakdown.