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I am sure that there is an easy answer to this question, but I would be most grateful if Taxation readers could put my mind to rest on it.
My client started trading last year and has just registered for VAT, backdated to the commencement of the trade.
His supplies are zero rated and he has just received a repayment of VAT of approximately £10,000 from HMRC representing the input tax previously paid by him.
Am I correct in including the repayment for
31 December 2005 in this year's accounts as a sundry receipt that is liable to income tax?
I am sure that there is an easy answer to this question but I would be most grateful if Taxation readers could put my mind to rest on it.
My client started trading last year and has just registered for VAT backdated to the commencement of the trade.
His supplies are zero rated and he has just received a repayment of VAT of approximately £10 000 from HMRC representing the input tax previously paid by him.
Am I correct in including the repayment for
31 December 2005 in this year's accounts as a sundry receipt that is liable to income tax?
Query T16 863 – Input.
Reply by Vairao:
The 'gut' reaction is the correct one — a trader cannot make a profit out of the VAT system without it being brought into account.
The way in which the VAT system works does however need to be borne in...
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