Recording VAT for tax records

[DoubleE91]

Hi,
I am a sole trader and I do my own accounts, they are fairly simple.
I'm about to register for VAT voluntarily and am wondering how to account for it.
So far I have just one accounting spreadsheet that puts my sales (on which no VAT is charged) against my expenses (including VAT) to calculate my profit which is reported to HMRC for the tax year.

I've heard VAT should stay off the tax records when registered, so want to get this straight.

To retain my existing spreadsheet I should:
-Leave everything as it was up until now as above.
-Further sales from point of registration on which I now charge VAT, should be written down without the VAT charge added as income
-Further purchases made from point of registration should be written down without the VAT charge added as an expense

-VAT charged on my sales should be recorded in a new VAT spreadsheet
-VAT paid on my purchases should be recorded in the new VAT spreadsheet
-The difference of these is what I owe/get refunded. This can be recorded as an income or an expense in my original spreadsheet for me to see my true profit, BUT SHOULD BE REMOVED FOR THE TAX RETURN. Presuming registering for VAT is profitable to me as I have calculated, my business profit will now be higher than what I report for tax and get taxed on. Is this correct?

I'll also be backdating some purchases, so am I correct in assuming I have to go back on my expenses in the spreadsheet and remove the VAT portion from the purchases I'll be backdating? Currently I'd recorded expenses as a total figure inclusive of VAT.

Thank you

 

[Scalloway]

How I would do it for the current year going forward is to set up your income and expenditure spreadsheet with columns for Total, VAT and Net. This will ensure you don't miss anything. The net figures go in your accounts.

VAT reclaimed on previous years expenditure will go in your accounts as income.

 

[DoubleE91]

Thanks, I'll do that. In my accounts as income i.e. taxable profit? So VAT refunds are only non-taxable in the future? Seems fair as I haven't been charging VAT through those purchase periods that I'll be backdating. Do I indeed need to go through previous records for this tax year and remove the VAT % from all the expenses I intend to backdate? Perhaps not, as I wont be able to do that for previous tax years. Definitely seems fair if the backdated refund is taxable then as that's all very much in my favour

 

[STDFR33]

I would recommend you start using a proper bookkeeping package. There are plenty of free options available.

 

[lesvatadvice]

VAT refunds are not non-taxable; they are reductions in your costs, so increase your profits for income tax.
A basic accounting package would solve all these questions.

 

[MyAccountantOnline]

It's really easy to make errors with spreadsheets, especially when dealing with VAT.

If you dont want to pay for software have a look at VTcashbook - it's free and will produce your VAT returns for you. I suspect it'll save you a lot of time and hassle.