Currently the Business Toolkit does not automatically include transactions dated outside of the VAT return period. So any relevant expenses incurred before VAT registration need to be added to the VAT return manually.
- First of all, make sure that any pre-VAT registration expenses that you want to include in your first VAT return are in line with HMRC guidance.
- To include these expenses in your first VAT return, you need to create an extra two External transactions, dated the first day of your VAT registration. For example, you spent £1,200 (of which £200 is VAT) on allowable expenses pre-VAT registration. You want to claim the £200 of VAT in your first VAT return. So the two extra external transactions you would create are:
- An external outgoing transaction with category 'Other', Gross Amount = £1,200, custom VAT amount = £200
- An external incoming transaction with category 'Other', Gross Amount = £1000 (the total spent minus the VAT). Set the VAT treatment for this external transaction to ‘Exclude from VAT return’.
You have now created a transaction that will feature on your VAT return but will net off in your bookkeeping. If the transaction was made using a different account and not your Starling account, and you also want to include it in your bookkeeping, you need to create another External transaction to do that.