If during the tax year, your company purchased some goods and services (standard-rated) that were used for making mixed supplies, then at the end of the tax year, your company must perform the annual apportionment adjustment in addition to adjustments made at the end of tax periods during the tax year. An adjustment may either increase the recoverable VAT or decrease it.
How to process
Made a year-end "wash-up" apportionment adjustment by creating an Input VAT Transaction as follows:
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- Click Create to create a new Input VAT Transaction.
- In the Company field, select a virtual company specially created for tax adjustments.
- Select Annual Apportionment Adjustment as transaction type.
- Select either Decrease or Increase as adjustment type depending on sign of the adjustment.
- Select the Generate GL Transactions check box.
- According to the selected transaction type, select either Decrease Recoverable VAT or Increase Recoverable VAT option.
- Make sure the correct entity is selected in the Entity field.
- Select the department associated with the transaction.
- Below the Basis field, notice the link in blue font that presents information about the currency, its exchange rate, price type, and taxation option. Make sure the taxation option (Prices Include VAT) is the same as in the basis. Otherwise, click the link to open the Prices and Currency dialog box and select or clear the option.
- Click Save to record the document.
- On the Inventory and Services tab, click Add to add a new line.
- In the Contents column, type a brief description of the transaction, for instance, "Year-end adjustmentapportionment".
- In the VAT, % column, select the 5% option.
- Based on the calculated VAT adjustment amount for the year end, calculate the taxable amount which with the selected VAT of 5% should will result in the correct amount of VAT adjustment.
- Check that the correct VAT adjustment amount appears in the VAT Amount column.
- Save and post the document.
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