1
When you accrue for a purchase receipt in Procurement and sourcing / Accounts Payable, the accrual does not account for non-recoverable VAT.
If VAT is recoverable, everything is in order as the accrual posting matches the expense entry that is posted when the supplier invoice is processed.
However if you receipt a PO line that has non-recoverable VAT, the final expense posting at invoice is gross of VAT, and therefore to comply with the principle of an accrual, the accrual should be a footprint of the expense in the period in which the utility of the purchase became available for use i.e. gross of VAT.
Where purchases are for a large value as per Government procurement, the effect of the non-recoverable VAT can be a difference of millions of pounds.
The desired outcome is that the receipt posting takes account of the recoverability of VAT/Sales tax.
e.g. Unit price £1,000.00 quantity of 1,000 EA. Supplier charges VAT @ 20%.
As at 10.0.16 and prior the receipt accrual is for £1,000,000.00. Where VAT is recoverable, this is correct. When the VAT is not recoverable, the accrual should be £1,200,000.00.
When the invoice is posted for non-recoverable VAT, the expense posting always has the non-recoverable VAT added as an extra expense line, so to only accrue for the net cost creates monthly issues that the customer has to account for manually to gross up the receipts.
If VAT is recoverable, everything is in order as the accrual posting matches the expense entry that is posted when the supplier invoice is processed.
However if you receipt a PO line that has non-recoverable VAT, the final expense posting at invoice is gross of VAT, and therefore to comply with the principle of an accrual, the accrual should be a footprint of the expense in the period in which the utility of the purchase became available for use i.e. gross of VAT.
Where purchases are for a large value as per Government procurement, the effect of the non-recoverable VAT can be a difference of millions of pounds.
The desired outcome is that the receipt posting takes account of the recoverability of VAT/Sales tax.
e.g. Unit price £1,000.00 quantity of 1,000 EA. Supplier charges VAT @ 20%.
As at 10.0.16 and prior the receipt accrual is for £1,000,000.00. Where VAT is recoverable, this is correct. When the VAT is not recoverable, the accrual should be £1,200,000.00.
When the invoice is posted for non-recoverable VAT, the expense posting always has the non-recoverable VAT added as an extra expense line, so to only accrue for the net cost creates monthly issues that the customer has to account for manually to gross up the receipts.
STATUS DETAILS
Inactive