I have just submitted a first VAT return for a company (connected to main company) and had to manually adjust for a credit invoice that was received only as a contra to an initial purchase invoice (that I couldn't include normally in the return as it was out of reporting date, hence the manual adjustment) that was raised with incorrect VAT rate on - God I hope that made sense.
We mainly have expenses as a construction company and naturally we are reclaiming VAT, so sage created a Dr balance in tax liability N/C and a Cr balance in the manual adjustment N/C. Once VAT return is submitted, in the VAT transfer box, do I need to adjust the amount again prior to posting the journal or do I leave it as the adjustment has been made by sage already?
Then once we receive the amount and clear the balance in tax liability there will be the manual adjustment balance left. How is that balance treated? Do I move the balance to the purchase control tax account? The credit invoice is already set against the purchase invoice.
Would appreciate the help, I hope the phrasing makes sense.
Hi Marios
Sorry I have no clue what you are talking about! lol
No seriously - Im not sure I do.
The 'contra' - did you receive paperwork (ie the suppliers invoice)? Who raised what/where with the incorrect VAT rate?
It being out of reporting date doesnt mean you need to enter it manually - the system allows you to include previously un-reconciled transactions so doesnt need a manual adjustment if you agree to this.
(Assuming the issue is not of reportable value!)
How easy is it to do a restore to pre VAT to sort this, or have you now done the VAT online so its best left at that?
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Right, first of all submission was done online so I'm afraid that boat has sailed...
In regards to including previous unreconciled transactions, I thought about it but it wouldn't allow me to pick that specific one only. Which means it would pick up everything else going backwards and I wasn't allowed to include everything else. HMRC only allows you to go 6 months back for services (which is what the invoice was meant to be for).
Our main company raised the invoice with 20% to the company in question in June 2015. in June 2016 there was a credit invoice raised to contra the initial invoice. And then it was reissued with proper rate (part 0%, part 5%, part 20%, it's all relative to constructing new buildings and what qualifies for what VAT rate). And yes we do have paperwork on both sides.
This was the first VAT return for the secondary company (registration in the 15th March 2016). So couldn't go back to June 2015. To not include it would be misrepresenting since the credit was raised only to cancel the first invoice, not to mention that we would have to pay the VAT without being able to claim it back (considerable amount). So to the accountant's advise I manually adjusted the relevant boxes with their respective amounts.
Thank you for your reply, I hope the picture is more clear.
Right, first of all submission was done online so I'm afraid that boat has sailed... Bummer!
In regards to including previous unreconciled transactions, I thought about it but it wouldn't allow me to pick that specific one only. Oh no - will pick up all unrec items. Which means it would pick up everything else going backwards and I wasn't allowed to include everything else. Anything pre VAT registration its best to key as T9. Then once you register and can only go back so far, you just key it as an adjustment journal with a T1 code as appropriate. Arent you glad you asked me earlier, lol. So that ship has sailed too. HMRC only allows you to go 6 months back for services (which is what the invoice was meant to be for).
So for future - any items you get that are pre-dated the last VAT return you have just done, I would be tempted to key as being received as the first day in the new period, but with a note to show the actual date of the item. Lock down the prior period perhaps like you would at year end. Unless of course they are of a material nature and you produce accurate managements direct from Sage. Outside of sage you can just handle them in excel as to when they should be, easily enough.
At year end, I might be tempted to do the roll over as usual, then create a new sage so you can include prior items moving forward, depends how much of an issue it is to you.
Our main company raised the invoice with 20% to the company in question in June 2015. in June 2016 there was a credit invoice raised to contra the initial invoice. And then it was reissued with proper rate (part 0%, part 5%, part 20%, it's all relative to constructing new buildings and what qualifies for what VAT rate). And yes we do have paperwork on both sides. Ahhh = when you said contra, I assumed you meant a contra position between purchase/sales ledger. Ok - ignore that one then!
This was the first VAT return for the secondary company (registration in the 15th March 2016). I do hope there wasnt any artificial separation here. Have to throw that in for anyone else looking! Leave that one up to you guys! Am a wee bit confused by the credit note of the whole invoice - are you saying this June 2015 effectively was issued in error? Was it material in terms of the year end accounts completed on either side, given your next line comment about it being a considerable amount?!
So couldn't go back to June 2015. To not include it would be misrepresenting since the credit was raised only to cancel the first invoice, (so what is the main company doing - surely they will now be using that to reclaim the VAT?) not to mention that we would have to pay the VAT without being able to claim it back (considerable amount). I wonder what the VAT mans view of that would be? So to the accountant's advise I manually adjusted the relevant boxes with their respective amounts. Im assuming that you copied the Accountant in to all relevant paperwork and stressed the dates involved as to be honest Im not sure what you have done is right, but my head is hurting and I would need to trawl the VAT regulations and havent got time.
Thank you for your reply, I hope the picture is more clear.
What is also giving me brain ache.....partly cos I cannot see it....is what entries this has created and what you transferred via the VAT wizard (ie the part of the VAT screen that processes your trans to clear the control accounts).
I would suggest you have a look at the entries concerned - it may well be that you just need to clear the manual adjustment account to the VAT liab account so that the two figures match the wizard figures. Or you may need to clear the ledger control accounts to clear the manual adjustment account.
Sorry - Ive had one of these myself a while ago, but in relation to a journal adjustment that was done without the VAT, but I cant recall which way round I did it with the manual adjustment account. if I get the chance I will check the software and see. But in the meantime I would backup (as usual), try both ways perhaps - easiest way is to do a reconciliation of items held in the control accounts as I suspect the wizard will not have transferred them out of there to the VAT liab.
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Then once you register and can only go back so far, you just key it as an adjustment journal with a T1 code as appropriate. Arent you glad you asked me earlier, lol. So that ship has sailed too.
I do hope there wasn't any artificial separation here. Have to throw that in for anyone else looking! Leave that one up to you guys! Nooo, everything is proper, companies house registered and different accounts. No group or anything like that but they are connected as director and shareholder is one.
Am a wee bit confused by the credit note of the whole invoice - are you saying this June 2015 effectively was issued in error? Was it material in terms of the year end accounts completed on either side, given your next line comment about it being a considerable amount?! The amount is not massive but the VAT we are reclaiming on the back of this credit invoice makes up for 2/3 of the total claim.
(so what is the main company doing - surely they will now be using that to reclaim the VAT?) The main company has been ongoing for the last few years, which means that VAT was paid for when the invoice was initially raised in error and claimed back when the credit was raised to correct the mistake. However the company in question was not VAT registered so no claim was made for the invoice in error. Now, the correction credit invoice is post registration so naturally we are required to pay output tax. What we should have done is to arrange for registration earlier, both invoices would cancel each other out and everything would be fine. But because I am lucky like that we didn't, so now i get to pick up all this wonderful work experience, with your help of course.
I wonder what the VAT mans view of that would be? I will let you know soon, I think since it's the first return an enquiry is coming through.
Im assuming that you copied the Accountant in to all relevant paperwork and stressed the dates involved as to be honest Im not sure what you have done is right, Like I said I followed the accountants advise.
What is also giving me brain ache.....partly cos I cannot see it....is what entries this has created and what you transferred via the VAT wizard (ie the part of the VAT screen that processes your trans to clear the control accounts). So the steps I followed:
After VAT calculation I manually adjusted boxes 4 (VAT reclaimed on purchase) by adding the VAT on the Initial invoice, and 7 (Total Value of Purchases, excluding VAT) by adding the NET of the same invoice.
After submission and reconciliation by sage, the only journal entry sage generated was
2202 Dr VAT LIABILITY £XX,XXX (The adjusted VAT)
2204 Cr MANUAL ADJUSTMENT £XX,XXX (The adjusted VAT)
There is 0 sales tax Control Account as the company has no sales that are VAT rated (Properties sold were 0% Rated). I think I have mentioned something in a previous post...
And finally the Purchases tax control account is still left untouched post- submission since i have not yet posted the journal that the wizards generates, which is the amount sage calculated before any manual adjustments (Cr Purchase Tax, Cr Tax Liability). Which brings me back to my questions.
So I gather, first I do not adjust the journal to include the adjustment but post the journal as the wizard produces. Then the balance that sits in the tax liability N/C is equal to the amount claimed in the return, so that's fine. Then I have the balance sitting in the manual adjustment N/C. The adjusted for amount still sits in purchase Tax control account, so I Dr the adjustment and Cr the purchase tax control account and that works. I just want to confirm that it's ok to do so.
If yes then I have a very small balance left in the Purchase Tax control account that comes from all the invoices I've posted and couldn't include in the return, due to them being too far back from effective registration date. But I haven't got to that yet.
So I gather, first I do not adjust the journal to include the adjustment but post the journal as the wizard produces. Then the balance that sits in the tax liability N/C is equal to the amount claimed in the return, so that's fine. Then I have the balance sitting in the manual adjustment N/C. The adjusted for amount still sits in purchase Tax control account, so I Dr the adjustment and Cr the purchase tax control account and that works. I just want to confirm that it's ok to do so.
If yes then I have a very small balance left in the Purchase Tax control account that comes from all the invoices I've posted and couldn't include in the return, due to them being too far back from effective registration date. But I haven't got to that yet.
Please try not to forget that I am still learning
Hi Marios
Was hoping that my poor overworked brain would be a bit calmer so I can actually review properly what you have put and think through the sage process, but it appears not. Sorry - this is my busiest time of year with clients, not getting much sleep, having zero time for myself and mid exams with zero hope of being able to do any coursework never mind revision is seriously impacting on my brain capacity and function at the mo.
The manual adjustment will not have cleared the purchase tax control account so yes you will have to journal to clear it from there.
Arent we all still learning? You can never know everything in this profession!
I must say though - you have reminded me that I havent yet sent my bill and I was just saying to someone how on top of that and my credit control I usually am.
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
You already helped enough and I really appreciate your time, I think I know what I should be doing now. So what kind of exams are you taking if you don't mind me asking?
In any case good luck with everything and rest yourself.
Actually I have a free course so thought I would do that just for the hell of it. But Im supposed to be doing ACCA, amongst other things. Never gonna happen unless I lose some clients.
-- Edited by Cheshire on Saturday 12th of November 2016 08:19:34 AM
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
