VAT126 Claim for Refund by Local Authorities

HMRC allow certain non-VAT registered bodies like Local Authorities to reclaim VAT paid on goods and services. To reclaim the VAT, form VAT 126 is required. This is a simple list showing the VAT portion of all relevant transactions.

Assuming that the company setup wizard has been set as non-VAT registered, the question is ‘how do you prepare that list when you have no access to the VAT section’.

The answer is to open a new Expense Account, naming it ‘VAT126 Claims’ or something similar. Every time you enter an expense of this type, enter 2 transactions:

  1. The original purchase (normal Purchase Transaction for the full amount From Bank To Expenses)
  2. A Transfer Transaction From Expenses To VAT126 Claims.

At any time, you can now go to the Chart of Accounts, double click on the VAT126 Claims account and view or export all your claims. You can get a full audit, if necessary, by doing the same with your real expense accounts.

TIP: You can get the software to calculate the VAT portion for you by entering an = sign and the following equation: full amount - (full amount / vat rate) Example where Full Amount = 11.50 and VAT Rate is 15%: =11.5-(11.5/1.15) will produce 1.50

NOTE: You would be better advised to enter the VAT exactly as it appears on your receipt rather than auto-calculate it. This is because a receipt may not always be at the standard rate/and or may include zero or exempt items/and or may not have been calculated correctly in the first place.