What are VAT Adjustments?

VAT Adjustments (also known as journals) are used to adjust the figures on the VAT return.

For example:

Fuel Scale Charge - The Fuel Scale Charge system is a simplified way of taxing the private use of car fuel. If you use your vehicle for business and private motoring, you can claim all the VAT on road fuel as long as you apply the appropriate fuel scale charge which is based on a standard table that relates to CO2 emissions.

See https://www.gov.uk/fuel-scale-charge

Partial Exemption - A VAT registered business may fall within the scope of partial exemption when it has supplies of both a taxable and an exempt nature.

In this case sales (output) VAT cannot be charged on an exempt supply (for example domestic rents) and equally any purchase (input) VAT incurred directly in making the exempt supply, generally, cannot be recovered.

However some of the VAT on shared costs can be claimed. NB any business operating a partially exempt VAT system should refer to the current documentation supplied by HMRC.

https://www.gov.uk/guidance/vat-exemption-and-partial-exemption

The VAT adjustment can be used to adjust the amount of input VAT being claimed on shared expenses.

There are different methods that can be used to calculate the proportion of VAT that can be claimed on certain expenses so if you have any queries you should always consult a professional.

How to use VAT Adjustments in Farmplan Business Cloud

Go to + New VAT Adjustment

You will then be presented with the adjustment screen.

The above correction shows an adjustment that relates to a VAT fuel scale charge adjustment. Take care to select the correct VAT code so that the appropriate boxes are affected on the VAT return.

  • The output VAT has been credited (increased) so it will be shown in box 1 on the VAT return.

  • The cost of fuel to the business has been debited (increased) by the same amount but this will not affect the VAT return as it has a VAT code of NV.

  • An adjustment code in the Sales band has been credited (increased) by the net value with VAT code ST, so this will affect the VAT return (box 6).

  • To counteract that code and bring it back to 0, it has also been debited but this time will not affect the VAT return as it has VAT code of NV.

Remember the debit amount total must always equal the credit amount total.

You can easily view all previous adjustments by clicking on the magnifying glass symbol on the top right.

If you are unsure about how to make VAT adjustments then it is always best to check with your accountant first.

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