When and why you would do a Vat adjustment
You probably know that an adjustment is a calculation that results in an additional amount of output tax you have to pay or input tax that you can claim. But do you know when and why you would do an adjustment? Read on to find out...
If you're a Vat vendor and aren't quite sure of when and why would you would be allowed to do adjustment, don't fret. The Practical Vat Loose Leaf Service has you covered.
You're allowed to make an adjustment in the following circumstances:
You would do an adjustment where you've changed the use of goods, for example, where:
You originally acquired goods for your business, but now use them for exempt supplies or another non-business use; or
You acquired goods for exempt supplies or another non-business use and now want to use them in your business.
In either case, an adjustment will be necessary to 'amend' or 'adjust' either the output or the input tax.
Please note that if you calculate the adjustment and the change in use is less than 5% of the total use, you don't have to make an adjustment.
In addition, you can't do adjustments (for output or input tax) on goods where the input tax was specifically denied (for example, entertainment).
Well there you have it. If you tick any of the boxes mentioned, you're allowed to do an adjustment.