We are on a VAT FRS (Flat Rate Schem) - 14%.
We had a bad debt of £10 which has been written off using the Bad Debt button in March. First bad debt in 20 years so not bad going.
I’m just doing our 04/19 quarter VAT return and it has £1.40 in the “VAT reclaimed on purchases and other inputs” Box. This must be wrong on more than 1 level. It is a correction of an output so should be reflected in the Outputs Box. As a FRS business we cannot put any entries in the Inputs Box. The only way around this that I can see is to cancel the Bad Debt event and issue a credit note to replace it. It doesn’t matter much on a debt this small but had it been a much larger amount I can see this workaround being a problem.
Is there a fault in the software or an accounting rule and VAT FRS handling rule I’m not aware of?