Capital introduced and VAT.

[Wowee]

First quarter VAT for a limited company.

The directors bought various things (furniture, office equipment etc) out of their own pockets, or brought them from other companies they are involved with.

Can I put these thru as purchase invoices, code them to capital introduced, and reclaim the VAT? How far ahead of VAT registration can be reclaimed?

Any help gratefully received.

 

[dp0848]

Hi,

Firstly there is no such thing as capital introduced when dealing with a limited company. Capital introduced is for sole traders and partnerships.

The way to deal with the issues you raise is to:

1) Get the directors to complete expense claim forms.

2) Enter the expenses in to the accounts systems as a debit to the appropriate cost or fixed assets account and credit the director's DLA (Directors Loan Account) and, of course, the VAT control account. Then as and when cash flow allows the company can pay down the balance of the DLAs.

You can reclaim VAT on services purchase by the company up to six months prior to registration and up to three years for goods. However the goods must still be in the possession of the company.

David.

 

[Kevin Hall]

David is right. Have a look at Section 11 of HMRC's VAT Notice 700 for more detrailed confirmation of the VAT position. In particular, Paragraph 11.4 might be of interest:

... you can treat this VAT as input tax if the:

> rules in paragraphs 11.2 or 11.3 would allow you to do so if the goods or services had been supplied to the person who is now registered for VAT;
> goods or services were obtained or imported by a person who became a member, officer or employee of the body;
> person was reimbursed for the full cost; and
> person was not a taxable person at the time of the supply or importation.

 

[dp0848]

2) Enter the expenses in to the accounts systems as a debit to the appropriate cost or fixed assets account and credit the director's DLA (Directors Loan Account) and, of course, the VAT control account. Then as and when cash flow allows the company can pay down the balance of the DLAs.

Sorry that should have read debit the VAT control account, not credit it.

 

[Wowee]

Thanks, that makes sense.