Flat Rate VAT & Transaction Tagging / Invoice Creation

Hi,

We have a problem. We’re registered for Flat Rate VAT and have been creating invoices from bank tagging which has lead to the following:

Receive £1000 via bank, create invoice via tagging which leads to invoice creation of £1000 + VAT or £1200 inc VAT. Flat rate VAT for us is 7.5% so liability becomes £90.

Instead of what we should have been doing….

Receive £1000 via bank, create invoice manually via client portal at £833.33 + VAT (£1000 inc VAT), and then tag the bank transaction to the invoice. Flat rate VAT liability is then correct at £75. Comments welcome on whether this methodology is correct.

Any ideas on how we correct this historically. We have locked off accounting periods and rolling back would be messy.

We thought it would just be a case of crediting the account and reinvoicing. But it appears you can’t create a credit without tagging it to the bank account. If we credit £1200 inc vat and then reinvoice £1000 inc vat it leaves a -£200 balance on the bank account.

I should mention that when I say bank account, I’m referring to an ebay managed payments account we have set up in quickfile.

Any suggestion would be gratefully appreciated.

Regards,

David

I don’t understand how this could have been happening - if you create an invoice by tagging a bank transaction then the bank transaction amount should become the gross invoice total including VAT. If you have an invoice for £1200 and allocate a payment of £1000 then that leaves £200 outstanding and the invoice will only be part-paid.

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