Universal credit - inputting company expense

Nikster73

Can anyone advise me please.
When inputting business expenses.  Will I add the VAT payments to HMRC that we have paid this month?  its a figure of £5164.19 Im assuming its an expense as its VAT, and we have paid in this month,  but not sure?

calcotti

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/893722/admh4.pdf

Value added tax
H4215 Payments of VAT can be a permitted deduction from S/E earnings and repayments of VAT by HMRC can be a receipt into the business. HMRC allows individuals a choice in how they treat VAT receipts in their cash basis. Individuals registered for VAT can either report earnings
1. inclusive of VAT and deduct a VAT payment to HMRC or
2. exclusive of VAT and not permit a deduction of a VAT payment to HMRC.

H4216 For UC purposes, claimants have the same choice. Claimants are expected to be consistent with their choice of VAT inclusive and exclusive in each assessment period.

Nikster73

I dont know what the benefits would be for inputing the Vat as expenses?  If I do input them, what happens next?

Icequeen1

Nikster73 said:

I dont know what the benefits would be for inputing the Vat as expenses?  If I do input them, what happens next?

What do you do for tax purposes? Do you operate on the cash basis - if so, you need to so the same for UC. If you don't, then you have a choice. 

Nikster73

Our accountant submits all tax returns.  we have paid out £5164 on Vat this month, and have never made a UC claim ever before, so didn't know if it was classed as an expense?  Do most people submit it as an expense?

calcotti

Icequeen1 said:

Nikster73 said:

I dont know what the benefits would be for inputing the Vat as expenses?  If I do input them, what happens next?

What do you do for tax purposes? Do you operate on the cash basis - if so, you need to so the same for UC. If you don't, then you have a choice. 

UC is always done on a cash accounting basis - there is no choice. I can't see anything that says you have to do the same with VAT for UC as for tax. 

calcotti

Nikster73 said:

Our accountant submits all tax returns.  we have paid out £5164 on Vat this month, and have never made a UC claim ever before, so didn't know if it was classed as an expense?  Do most people submit it as an expense?

It's up to you. If you charge VAT on your services then you can include the VAT you receive from your customers as part of your income and show the VAT paid to HMRC as an expense. Alternatively you can exclude the VAT from both your income and your expenditure. Once you have decided which you will do you have to do it the same way each month. Given that HMRC are usually only paid quarterly if you include the VAT your income will be higher in the months you are not paying HMRC but will be lower in the month you do.

Icequeen1

calcotti said:

Icequeen1 said:

Nikster73 said:

I dont know what the benefits would be for inputing the Vat as expenses?  If I do input them, what happens next?

What do you do for tax purposes? Do you operate on the cash basis - if so, you need to so the same for UC. If you don't, then you have a choice. 

UC is always done on a cash accounting basis - there is no choice. I can't see anything that says you have to do the same with VAT for UC as for tax. 

My understanding is that DWP tell you to follow whatever you do for tax if you also use cash accounting for that. But you're probably right that there is nothing that says you have to follow that. 

NedS

If you have reported your income for UC including a charge for VAT, then you can include your VAT payment as an expense.

If you have reported your income excluding the VAT charge then you should not report VAT as an expense (as you have not reported it as an income).

Make sense?

Nikster73

We have reported our monthly salary figures as income, and then any income (invoices) that are paid into the business in that month.  It all seems so confusing.  I hope that if I put through the vat as an expense, that we won't owe and UC monies back in the future.......

calcotti

You should not be reporting any salary paid through PAYE as income. Salary paid through PAYE is reported to UC by HMRC. The salary is actually a business expense.

The PAYE salary is employed income.
The profit (difference between business income and business expenditure) is self employed income.

For the reported income have you included the VAT element of the invoices or not? As already explained if you did the VAT payment is an allowable expense, if you did not then it is not.