Good morning,
I have the following situation which I would be grateful of some assistance with:
Limited company registered in the UK on the standard rate VAT scheme.
A mobile phone was purchased for use by the director (myself). As the use of this phone is 50% business/50% personal, my accountant has advised me to only reclaim 50% of the VAT.
The purchase was entered as a ‘spend money’ bank transaction with 20% VAT applied and as you’d expect, I now have a negative amount showing in the tax payable row of my liabilities for the full 20% of the purchase cost.
Normally, I reclaim the VAT with a quarterly return which makes this entry zero. By only reclaiming 50% of the VAT amount, I will have an outstanding (negative) tax liability going forward.
What’s the best way to ‘write off’ the 50% “personal” portion of the VAT entry:
- Half the bank transaction on the purchase price - messy given it was all paid from the company account
- Create a ‘special’ VAT rate of 10% and apply it to this item - this doesn’t seem right
- none of the above
Many thanks for any ideas