AccountsPortal Help Documentation

Flat Rate VAT and Capital Purchases


Under the Flat Rate Scheme, you cannot normally reclaim VAT you have paid on purchases. However, if capital assets are purchased with a VAT inclusive value of £2,000 or more, the VAT can be recovered in the normal way under certain circumstances laid out by the HMRC.

At the moment, if you are registered on the Flat Rate Scheme, there is no way to automatically include Input VAT in the AccountsPortal VAT Report. The recommended approach is that you enter a Journal to move the relevant VAT from the 'Profit/Loss from FRS' account (4575) to the 'VAT Control' account (2100) and make a manual adjustment before submission.

Step 1 - Enter the Purchase Invoice or Bank Transaction (assume purchase for £2400 incl VAT)

The result, as displayed in the Transaction Line Item report would reflect

Credit Supplier/Accounts Payable - £2400
Debit Asset Purchased - £2000 (with 20% VAT code assigned to the line item)
Debit Profit/Loss from FRS - £400 (this line is auto created by the system)

Step 2 - Enter a Journal to update the VAT Control account

Credit Profit/Loss from FRS - £400
Debit VAT Control - £400

The result is that you have reduced your VAT liability by £400. Please note that this will not show up in the AccountsPortal VAT Report and that you will need to adjust your figures in Box 4 and Box 7 when you submit the VAT Report to HMRC.