VAT Apportioning for Personal Use

If you are paying a bill that includes VAT but only part of it is for business use then you can only claim back the VAT for the business part (this also applies to income tax laibility too).

How you deal with this depends on how the bill was paid:

A) If paid with cash or through your personal bank or credit card. This is the simplest case. Just enter a single Purchase Transaction for the business use part only. The VAT will then also be correct.

B) If paid via your business bank or credit card. Make two transactions:

  1. Transfer Transaction From Bank (or Credit Card) to Cash for the full amount.
  2. Purchase Transaction From Cash to relevant expense account for the business part of the bill

This will leave you with a residue in Cash. You can make a Transfer of that to Drawings if you are self-employed or a loan if you are employed, or simply leave it in cash.