I have recently taken over my partners accounts and Sage is in a bit of a mess from the previous book keeper.
When i recently did a bank reconcilliation there were about 30 un-reconcilled items on it from previous months. I could not understand how this had happened as all previous bank recs have balanced? After looking into it i realised that these un-reconcilled transactions are duplicates.
I contacted the previous book keeper who has advised me to go through the un-reconcilled items and delete the duplicates in customer corrections. Is this correct?
I am concerned as when i did a VAT return recently it said it had only found 2 un-reconicilled items and did i want to include them on the VAT return i clicked no but am concerned now that the other un-reconcilled itmes have been included in the previous vat returns?? Please can someone advise as to how i go about sorting this out. I could almost cry as i feel i will never get this sorted.
Items reconciled on the VAT return are different from items reconciled on the bank account, so one should not affect the other. You can check if they are all duplicate items by looking through the nominal or supplier accounts to see if you can see them in there.
It is possible that some items that now need deleting from the bank will have affected previous vat returns, i.e. duplicate petrol receipt, and deleting them will mean that this VAT will be repaid the next time you do a VAT return. This isn't the end of the world as it's not likely to be a great amount of money and everyone makes errors sometimes. I personally think it's somewhat shoddy work on the part of the previous bookkeeper.
The 2 items that you were asked about when you did the VAT return you can say 'yes' to next time, they will be entries that relate to an earlier period but were entered after that periods VAT had been processed, it's quite normal.
Hope this helps.
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
Im not sure what you mean by 'Items reconciled on the VAT return are different from items reconciled on the bank account' Why are they different?
A lot of the un-reconcilled transactions are for purchase payments such as petrol receipts but totalled up they come to alot of money!! How will i know if i need to change them on the VAT return? Will i be in trouble with HMRC about this?
I could really do with someone coming out to have a look at it with me and showing me how to do it? Are there people out there that will do this? I have completed lots of training courses but there is just so much to learn!
Just to put your mind at rest on this bit. Unless the mistakes made add up to more than £10,000 in underpaid vat - you don't have to inform HMRC, just adjust the next return.
So I doubt it..
If you post the area of the country you're in Becky, I'm sure you'll get plenty of offers from people willing to help you out .
-- Edited by ADAS on Tuesday 28th of June 2011 05:02:06 PM
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
When Jenny (BudgetB) said that items that have been reconciled on the VAT return are different from those that have been reconciled on the bank, she meant that an item might have been reconciled for the purposes of the VAT return (i.e. the VAT on the payment or receipt has been recorded and then reconciled) but it might still be outstanding on the bank rec because the payment or receipt hasn't yet gone through the bank. Therefore your duplicate payments will possibly have been recorded on the VAT return and subsequently reconciled, but because they are duplicates they will still be outstanding on the bank rec because they will not have gone through the bank.
I didn't think Sage allowed you to delete payments that have been VAT reconciled, but I have just tried it on my Sage and apparently it does. Imho it is best not to just delete entries willy nilly as it does not leave a very good audit trail. For each duplicated payment or receipt I would enter a corresponding opposite entry. E.g. For a bank payment for petrol I would enter a bank receipt to the same nominal code and with the same VAT amount and tax code. I would make a list of each of them first so you know exactly what you are reversing.
Hope this makes sense. Try not to worry too much....there are plenty of guys on here to help.
Whereabouts are you in the UK? Mostly everyone on the forum is in the UK
Just to put your mind at rest on this bit. Unless the mistakes made add up to more than £10,000 in underpaid vat - you don't have to inform HMRC, just adjust the next return.
So I doubt it..
If you post the area of the country you're in Becky, I'm sure you'll get plenty of offers from people willing to help you out .
Just to clarify. My understanding of this rule is that there is no need to make a voluntary disclosure. Anything above that needs to be reported
It does not mean that there wont be penalties under the new(ish) penalty regime, if HMRC discover the late underpayments for themselves
Basically
Self disclosure = tap on the wrist + low penalty (if below 10K)
HMRC discovery = tap on the wrist + higher penalty (if below 10K)
Self disclosure above 10K = slap on wrist + even higher penalty
HMRC discovery above 10K
If an error = two slaps on wrist + very high penalties
If deliberate and not concealed = three slaps on the wrist + extreme penalties
If deliberate and concealed = Criminal investigation + punative penalties
I'm a little confused though, if you don't have to make a voluntary disclosure if the error is less than £!0k how can a client secure the lower penalty?
I'm not questioning what your saying at all, but it seems a contradiction.
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
What they are saying is you don't have too but if we discover there is an error we will charge you interest, so gamble that we wont find anything
That's how I have interpretted it, as the guidance link below does not make a distinction. I cannot see any circumstance where HMRC will not charge interest on late payment of under declared VAT, even if there is no requirement to report it. I think the limit is there so they don't get inundated with error declarations for small amounts (I guess they considered 10K a small amount in the scheme of things)
The 10K limit only applies to errors that occur even when you take resonable care (HMRC have definitions for what is reasonable care), or careless mistakes (they have definitions for them too). Any deliberate understating has to be declared regardless of limit (I think anyone that deliberatly understates VAT is unlikely to put their hands up to it).
In the case of the 10K limit I think they will only charge interest on any late payments. With the other circumstance they will fine and charge interest.
Tony, its a bit more complicated than what Bill mentioned.
What Bill has omitted to mention is:
Mistake despite "Reasonable" Care - then the penalty is 0%
A "Careless" (failure to take reasonable care) is 0-30% penalty if unprompted or 15-30% if prompted...
Theres more
- but the low penalty Bill mentioned could be 0%!
But this is if the HMRC do a visit, and discover that the error was not corrected when it was discovered. This is why a voluntary disclosure is not required.
You are quite right, I have simplified this (there's only so much my two digit typing fingers can take)
I was going to add that there may be no penalty but interst can still be chargeable
Notice 700/42 covers it in a bit more depth but an extract is below
2.9 What if I discover a misdeclaration myself?
You will not receive a misdeclaration penalty if you discover and correct the misdeclaration voluntarily, before HMRC commence enquiries into your tax affairs.
However, you may still be liable for a civil evasion penalty.
There are two methods for correcting errors you have discovered on VAT returns already submitted. For errors discovered for periods commencing on or after 1 July 2008 where the due date for the return period in which you discover the error is before 01/04/2009 the MP/MP(R) regime applies
of £10,000 or less, or
if greater than £10,000, it does not exceed £50,000 or 1% of the box 6 VAT entry on the return for the period of discovery
you can adjust your VAT account and include the value of that adjustment in your VAT return for the period of discovery.
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