Should VAT be included in budget setting?

Question

When setting the following years budget, should known VAT reclaim be included in income. Or should it be a balance coming back when claimed and all VAT applicable expenditure calculated at net.

Answer 1

No, you don't account for vat in either the income or expenditure elements of your budget.

Answer 2

Logic might dictate that the simplest approach would be to input your “expenditure” estimate ex-VAT.
Then when a VAT qualifying invoice is received - the VAT is reclaimed.  It’s a zero sum.

There may be some bizarre, illogical, long winded and expense incurring government accounting rule to the contrary (if it is logical to the sane mind it’s almost guaranteed to have been balls about with by the civil service)  but the sensible approach would seem to be to isolate out your VAT from the budget since it is zero sum - spend / reclaim.