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Ammending a VAT return submission when we are now moved to making tax digital submissions

Hi,

I have an issue with my VAT return submission, we first got quickfile as we were aware tax becoming digital would be coming into play for the company, this was part way through a business year and we thought it would be good practice to retrospectively input all the accounts up to this point. This generated two VAT returns which we had already submitted to HMRC and calculated manually. However the VAT liability figure generated by quickfile is slightly lower than the figures we had already submitted to HMRC. Herein lies the issue, the next submission was to be done digitally and the difference couldn’t be simply adjusted on the VAT return on quickfile as the quickfile figures are correct for the previous VAT return submission it is only figure submitted to HMRC that is incorrect.

Our thinking is that as these submissions are saved from some time ago a Journal needs to be made to show the liability to be the figure HMRC have and then an adjustment on the next VAT return to decrease the liability to the correct figure.

I’m going to use example dates and figures here… so for the period 01-August-2018 to 31-October-2018 a VAT return was manually calculated showing a sales vat liability of £1100, this was submitted directly to HMRC and full payment made. On having entered all the invoices to quickfile retrospectively the VAT return (now saved) shows the sales vat liability as £1090. Therefore the return and payment to HMRC for that period is £10 over the quickfile sum (note the quickfile figure is the correct figure). This results in the VAT liability account being dr £10 and HMRC having the incorrect figures.

Do we journal the following:
Dr 2200 Sales Tax Control Account - £10 @ 31-October-2018
Cr 2202 Sales VAT Liability - £10 @ 31- October -2018

This will increase the VAT liability for that period but not show the calculations in the sales. It will also bring the VAT liability account back to nil.

Then in the next VAT submission to HMRC that we do ammend the figure to decrease the liability by £10 and make a note to self explaining why this has been done?

Or perhaps we are looking at this all wrong.

Any help would be much appreciated.

Do you know how the discrepancy arose? Was something just added up incorrectly in the manual return?

HI Yes thats what happened.

So you can still make manual adjustments to your VAT return to account for this. I don’t use VAT in QF so I’m not sure exactly how it works, but there should be somewhere in the return you can add an adjustment. This should then post the adjustment automatically to 2204 (Manual Adjustments), the other side being the VAT liability account (2202).
You can then raise a journal to clear 2204 to sales or wherever it needs to go to correct your accounts.
I would avoid journalling anything to 2202 as it won’t get picked up on the VAT return (because journals have an out of scope VAT code) and you can easily get tied in knots that way.

Under making tax digital you can’t add manual adjustments. That’s the point of mtd, there has to be a digital trail to the figures. What you’d need to do is create an entry somewhere for a vat return to pick it up.

Actually, that’s not correct. There are times when you have to make a manual adjustment, e.g. if you are using a margin scheme or have mixed supplies, or to correct a previous error. You can’t create an entry elsewhere for the return to pick up - journals don’t get picked up in the return, and anything else would be incorrect, as this is merely an arithmetic error in the previous return. As you are making the adjustment in Quickfile, before submitting the return, the adjustment and subsequent journal form the digital record.

OK. Please show me where the manual adjustment is entered. Because its not in the vat return section…

As I said, I don’t use VAT in Quickfile, only in other software, but if you look at the screenshots below, the red arrow next to each box is how you access the adjustments. I’ll put the link to the knowledgebase article on the subject too. Just scroll down to VAT adjustments.

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Thank You for all of this and apologies for the delay in replying. I can make the adjustment as suggested in your reply to the next VAT return so that HMRC will have the correct figure but my concern is in doing that it will knock my Quickfile figures out as my Quickfile account has the correct figures at present and it is only HMRC who have the incorrect figures as they were submitted before MTD. I’m unsure how to resolve this issue at the HMRC end all the while ensuring the figures in Quickfile remain the same. I hope that makes sense.

Taking your original example above, presumably your VAT liability in QF (a/c 2202) after loading all your “old” invoices, showed a balance of £10 debit, being the difference between what you had paid, and what was actually due?

Were your sales also added up incorrectly or just the VAT?

And were all your accounts kept manually prior to MTD?