Accounting for pre and post VAT registration dates

This article is written from the perspective of a UK based company who is about to become VAT registered in the UK, or who needs to account for a period prior to becoming VAT registered and a period after.

If your business is about to become VAT registered or you need to set up Link My Books to account for a non VAT registered period and a VAT registered period, then the good news is we've made it as simple as possible to manage this scenario.

Follow the steps below and if you get stuck then get in touch with the support team via the blue chat icon at the bottom right of any page.

When you connect your sales channel and Xero/QuickBooks account to Link My Books, the next step you will be presented with in the guided setup is the Accounts & Tax Rates Wizard.

On step 2 of the wizard you will see this screen asking if you are VAT registered in the UK:

You'll need to select 'No' from the drop down menu.

Then you will be prompted to confirm your tax rates, but since you are not VAT registered we will pre-populate them all with 'No VAT' tax rates.

Once we have finished processing all your data from your sales channel and your settlements are showing as 'Ready to Send' on the Settlement Dashboard, then you can begin sending them to Xero or QuickBooks.

Only send the ones that are dated before your VAT registration date at this point.

For a detailed walk though of how to send settlements to Xero or QuickBooks please see this help article.

IMPORTANT: If you have any settlements that span multiple calendar months, then you need to send only the part for the month which falls into your prior to VAT registration period.

Don't click 'Send to Xero/QuickBooks' on these settlements on the settlement dashboard. Instead click the 'View' option on the settlement action menu, and then click 'Send to Xero/QuickBooks' on that part only.

Now you can set up your Link My Books account to account for the period after becoming VAT registered.

Visit the Accounts & Tax Rates Wizard again.

On step 2 of the wizard you will see this screen again asking if you are VAT registered in the UK:

This time around select 'Yes' from the drop down menu.

Again you will be presented with some suggested tax rates. We advise that you check these with your accountant or tax advisor to ensure they are correct for your business.

Once you have done that move to the next step.

When you change your settings the system will refresh all of your settlements that have not already been sent to Xero/QuickBooks (if you want settlements that have already been sent to Xero/QuickBooks to refresh, then you can do so via the settlement action menu).

Once we have finished refreshing them and your settlements are all showing as 'Ready to Send' on the Settlement Dashboard then you can begin sending them to Xero/QuickBooks.

IMPORTANT: If you have any settlements that span multiple calendar months, then you need to send only the part for the month which falls into your post VAT registration period.

Don't click 'Send to Xero/QuickBooks' on these settlements on the settlement dashboard. Instead click the 'View' option on the settlement action menu, and then click 'Send to Xero/QuickBooks' on that part only.

HMRC say in their guidance around VAT registration that you can backdate claims for reclaiming VAT on goods and services paid before your VAT registration.

How far back can I go?

There’s a time limit for backdating claims for VAT paid before registration. From your date of registration the time limit is:

How does this apply to me as an ecommerce seller?

One of the main ways you can take advantage of this is by reclaiming the VAT you’ve paid on sales channels fees in the 6 months prior to when you became VAT registered.

Your accountant will be able to assist you in reclaiming the VAT on these fees.

For Amazon -

Until you enter your VAT number in Amazon Seller Central, Amazon will be charging you VAT (if you are a UK based company).

The process to reclaim any VAT paid on Amazon fees for the 6 months prior to you VAT registration date is as follows:

Step 1 - Visit Amazon Seller Central and navigate to:
Reports > Tax Document Library

Step 2 - Download all tax invoices for the 6 months prior to your registration date for each of the marketplaces you sell in.

Step 3 - Pass these to your accountant and ask them to make a manual journal entry since you have added these into Xero/QuickBooks as 'No VAT' and you want to reclaim the VAT paid under the HMRC guidance for reclaiming VAT on expenses for services in the 6 months prior to your VAT registration date.

The same process applies for other sales channels:

First download your tax invoices from your seller account for the 6 months prior to your VAT registration date.

Then pass these to your accountant and ask them to make a manual journal entry since you have added these into Xero/QuickBooks as 'No VAT' and you want to now reclaim the VAT paid under the HMRC guidance for reclaiming VAT on expenses for services in the 6 months prior to your VAT registration date.