I'm panicking abit because a client has their year end as December but their vat quarter as Nov-Dec-Jan I don't know why I did it but I ran the year end process on Sage after entering Januarys figures and then produced the vat return for the client. This ment about 68,500 was added to boxes 6 & 7 (total value of sales & purchases excluding vat) on the vat return. This obviously hasn't effected the vat they need to pay but because boxes 6 & 7 are massively high will hmrc reject it? The client says she is being chased to file the vat return because she thinks she forgot to but I'm wondering if she did file it with those figures but hmrc rejected the return and she didn't realise?
I'm confused. Running the year-end procedure shouldn't affect the VAT return - I've certainly never encountered any situations where it does. In the scenario you describe, it should make no difference whether you run the year-end procedure before or after running the VAT return or, for that matter, whether you run the year-end before or after you enter the January figures.
Perhaps it would help establish what seems to have gone wrong if you can provide a little more detail about what makes up that £68,500?
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
Hi Vince, just looked at the break down for that vat return and the 68,500 is a journal credit in box 6 that consists of all the ledger year ends for the various nominal codes and then that same figure is a journal debit in box 7. Do you think hmrc will have rejected the return because of this? The journals had a t2 tax code
Okay. That confirms that the problem was what I thought it was - and that you've corrected things so that the same problem won't reoccur. That's the good news.
The bad news is that what I was going to suggest to correct the figures shown on the VAT return - by reversing the year-end transactions with the same code as they were originally posted, and then posting them again correctly - won't fix the problem after all. I realised while I was driving home that it will actually just compound the problem. This is because Sage just takes any journals that have an included tax code, and adds any such credits to the outputs figure, and any such debits to the inputs figure; reversing the journals will actually double the discrepancy.
There is a way to make Sage show the right figures, but it includes putting "dummy" transactions onto the system that do actually look like Sales and Purchase credits (with an 'in use' tax code but 0 in the VAT column), and then reversing them as T9. I'm disinclined to do that, though, because it's essentially putting fake transactions on the system, which is Very Bad Practice Indeed[tm].
So instead, since you've said you'll be submitting the VAT figures manually, I'd suggest just printing out the necessary reports, and simply crossing through the incorrect figures on the VAT return print-out and writing the correct ones next to them, with a note on the bottom of the sheet to explain what you've done and why - and just submit the correct figures.
Sometimes, it pays to not try to be too clever. :)
Edit: Removed the tautology - "reoccur again" - duh!
-- Edited by VinceH on Thursday 28th of March 2013 06:38:05 PM
-- Edited by VinceH on Thursday 28th of March 2013 06:38:45 PM
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
It sounds like your tax codes are set up incorrectly. There was a release of Sage where the defaults were a little odd, and resulted in transactions appearing on the VAT return that shouldn't - it sounds like you may have been affected by this.
However, the problem version was, if memory serves, three or four years ago - so it seems a little odd that you're only just being affected by it now (if this is indeed your problem, which it sounds like it is). Disregarding that oddity, though...
I don't know if HMRC will reject the return per se, but if it's being submitted manually by logging into the HMRC site and entering the figures by hand, the system might very well point out that the outputs VAT amount doesn't tally with the net amount - and a significant discrepancy might in turn trigger the attention of HMRC, so there may be some communications and even an inspection.
When you say you've "produced" the VAT return - have you actually committed to it? i.e. have you allowed Sage to "reconcile" or "flag" the transactions for VAT? If not, it can probably be fixed.
If you *have* allowed Sage to reconcile the transactions, then (a) did you take a back-up immediately before producing the VAT return and (b) have you put many transactions into Sage since? If "yes" and "not many" then it would probably be worth restoring that back-up, and we can again fix the problem.
So firstly, answer those questions: Have you allowed Sage to reconcile the VAT return? Did you take a back-up immediately before doing it? And have you put many transactions on since?
Secondly, take a look at your tax codes - let's make sure that's right for in future! There are two things to look at for this:
From the menu choose Settings => Configuration => Tax Codes. Check that what's there looks right. For codes that should appear on the VAT return, they should have "Y" in the "In use" column (where "In use" means "in use (or should appear) on the VAT return").
Any codes that don't appear on the return should have "N" in that column (and 0.00 in the "Rate" column). I usually expect T9 to have an "N" - this is the code that has been used in Sage since the 1980s for transactions that shouldn't appear on the return.
(T2, the code that has been used for the journals in your case, is customarily used for the reduced 5% rate of VAT ).
Hopefully, T9 is showing as a rate of 0.00 and "N" in the "in use" column.
The second thing to check is the tax code that Sage is set to use for items that shouldn't go on the return.
From the menu, choose Settings => Company preferences => VAT.
There should be a "Non-vatable tax code" field, and that needs to show the code to be used for things like year-end journals. It probably shows T2 at the moment - but if T9 was set as I expect it to be above, then that's what it should be: T9.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
Thanks Vince. My Sage is version 16 and this is the first time I've used it for this client so that could be why I haven't had this prob before.
Yes it would be logging in to hmrc, entering figures manually and submitting.
No I haven't reconcilled the vat yet so that could be a good thing.
Right the tax codes T0 to T8 are all in use as is T20, 22, 23 & 24. T0 is 0.00 T1 20.00 T2 0.00 T3 20.00 T4 0.00 T5 5.00. Yes T9 isn't in use and is 0.00
Yes the non vatable tax code is set to T2, I've now changed it to T9 :)
Thanks for your help Vince, good of you to still be thinking about it whilst driving home :) I removed the 68,500 from boxes 6 & 7 and the client submitted the return successfully today. Bad news is she forgot to file it soon enough incurring a £100 fine! Least that wasn't my fault hey. Thanks again
