Crediting VAT on an invoice (VAT return not done yet)

Hi, I created an invoice, then forgot to charge the client VAT. Customer had already paid the net amount (£2570.00) but not the VAT. So, I credited the net invoice and created another invoice with VAT added (£2570.00 with £514.00 VAT). I then showed the partiial payment of the invoice (net amount) so only the VAT is outstanding.
Anyway, now I need to credit that VAT and ensure it comes out of my VAT returns.
How do I do this please?
Kind regards,

Hi @vikstar

I just wanted to confirm what you meant by credit the VAT?

If the client hasn’t paid the VAT you can’t credit it, or do you not actually mean credit the VAT?

If the client hasn’t paid any VAT then it won’t show up on returns.

What are you trying to achieve? I would have either just edited the original invoice or made another VAT only invoice which I think would have been simplest.

Hi, I now need to credit the VAT to the customer as it not being accepted by the client.

If I’ve understood you correctly, you’ve reissued the invoice with VAT, but the client isn’t happy to pay it, so now you need to credit the equivalent to the VAT element?

You would still need to pay the VAT yourself, unfortunately there’s no escaping that. What I would suggest is a credit note against the invoice for the value of the VAT (in your case, £514.00). But this would be against the whole value of the invoice, not just the VAT.

As always - I’m not an accountant, so it may be worth double checking with yours to make sure you get it right.

If you’ve made a mistake in issuing the invoice without VAT, the client has paid this in good faith thinking it was the full amount, then there’s two things you can do at this stage. If the client is a VAT registered business they may be willing to pay the extra VAT which they can later reclaim, but if they’re not VAT registered then I can see why they might not want to.

In that case, as far as HMRC is concerned you must treat the £2570 as inclusive of VAT (so edit the invoice to be net £2141.67 and VAT £428.33). The total remains as what the customer has paid but you will forfeit £428.33 on your next VAT return - and you won’t make the same mistake again!

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