Issue with VAT recording (looks like it could be a system bug?)
Client is on VAT Cash reporting so VAT should be reported when the payments are made to suppliers. To simplify matters the sales are all zero rated. There are several examples of this error below is just one.
QF00019 purchase invoice raised dated 17/08/2020 with VAT of £6.56.
Payment received in bank 09/07/2020 with £102.34 allocated against said invoice.
1 invoice line had vat at 20% the other with 0% so i am assuming the payment is allocated with the VAT pro-rated (this seems to reflect the system)
CN0002 is then raised for the difference of the invoice not paid (this is fully 0% VAT) so no VAT credit
The problem being there is then no adjustment through the VAT return for the VAT that has not been claimed?
Original invoice £6.56 VAT
Payment should have covered the VAT supply so should have been the full VAT recorded but only pro-rated at £4
Credit cancelled the remaining balance on the invoice but not the VAT (which is correct as only 0% rated goods returned)
The remaining VAT is still outstanding on the purchase VAT account and has never been claimed through a VAT return?
This looks to me like a system bug - are you aware of this?
I agree this is some kind of bug but as a programmer (not one who works for QuickFile) this sounds like a horrible edge case in the logic that would be easy to miss first time around…
I suspect that to fix your books at this point you’ll have to credit the original purchase in full (possibly as two credit notes, one to clear the unpaid balance and the other to credit the paid part and hold the funds on account) and then create a new purchase to replace it, paid from credit. The credit notes and new purchase can still be dated with the original supplier invoice date.
As @ian_roberts mentions, it’s a tricky edge case to handle for cash accounting, which would be quite complex to support in full.
In this situation, you would need to either apportion the VAT credit on the credit note itself (e.g. crediting partially at 0%, and partially at 20%), or add a manual adjustment to the VAT return, which is still permitted under MTD.
@ian_roberts@QFMathew many thanks for your responses, I was kind of hoping there would be a solution as i have a few clients this will be an issue for. I will go and reconcile the VAT accounts and find the issues. For the client in question i had planned on using the Manual Adjustment on the VAT return as suggeted by Mathew.