Journal Direct to Control Accounts

Hi, is it possible to journal direct to a purchase or sales tax control account? I have tried a journal where I have credited the purchase tax control account and debited the proprietor drawings account as I wish to reduce the VAT being claimed on part of the motoring expenses to allow for personal use but when I run the VAT return it does not allow for this journal amount and doesn’t reduce the VAT being claimed in box 4. I always thought it wasn’t advisable to journal direct to control accounts but in this scenario it would be an ideal solution! Otherwise I have to reverse the transactions I have entered and start again (I wasn’t advised of the personal element until after they had been entered).

There’s nothing stopping you from journalling to the sales or purchase tax control accounts, however the VAT calculations are derived from the invoices posted rather than directly from the sales or purchase tax ledgers. For that reason it’s not really something we’d recommend doing.

Instead if you want to adjust your VAT calculations you can do so directly before committing your VAT return using the adjustment method described here.

Thanks. I have entered the adjustments and filed the return. But when I checked the VAT liability nominal it’s not showing the correct balance.

I have added an adjustment to the sales vat figure and also an adjustment to the purchase tax figure.
This net adjustment has created a journal between the VAT Liability nominal and Manual Adjustments nominal, which I understand.

But, there has also been a journal for the full adjusted output tax amount between the sales tax control account and the VAT liability account, therefore it has duplicated the sales tax in the VAT liability account, is this correct? I now have a balance on the Sales Tax control account that I wouldn’t expect to see as, instead of a DR for the same amount as the CR balance to leave a zero balance, it has DR the full adjusted amount, as per my note above, with the CR entry against the VAT liability nominal.

I’ve asked a developer to look at this, it does seem to me that the box 1 figure should journal in the gross amount as the adjustment is already accounted for in the specific adjustment journals.

Are you OK to manually adjust your VAT journal? In future we will ensure the box adjustments journal in the gross amounts.

Thanks, but I’m not sure what you are agreeing to and what you are saying requires attention. Could you show a DR and CR example please of how you think the VAT return should have carried out the journals?

eg.(normal VAT return with no adjustments)

DR sales tax control account (account is left with a zero balance)
CR Vat liability account
CR purchase tax control account (account is left with a zero balance)
DR Vat liability account

The balance on the VAT liability account either shows a CR or DR balance depending upon if a payment or a refund is due.

If there are adjustments, what are the correct journals?

This example is for a VAT reclaim of £144.94 with no adjustments.

Here are the corresponding journals.

So this tallies with your assessment.

Now filing the same return and adjusting the box 1 total up to £204.20 (i.e. + £100).

The NET of the adjustments also get’s journalled over to the balance sheet.

A fix was applied today… basically prior to the fix the CR on the first line (2202) was taking the gross amount (inc the adjustment) and then also including that same adjustment in the ‘MANUAL ADJ VAT’ lines. To correct this you’d need to take that adjust amount off the total on the top line.

If you were to remove and re-insert the return that would also fix the journal, but it should be easier just to directly edit it.

Let me know if I can be of further assistance.

Thanks. So once a return has been filed on Quickfile, it can be reversed? I can’t log in at present as another user is on but once you go into the VAT page, is there a delete button or reverse option? (can only one person log in at a time?)

Also, is it ok to continue to enter transactions after the vat quarter end date, prior to running the VAT return? Eg, quarter end 30.06.14, new invoices dated 01.07.14 onwards?

Yes VAT returns can be reversed in QuickFile, if you go into view the VAT return detail page you will see a red “Rollback” button at the bottom. This will remove any associated VAT journals.

It’s also possible for two users to be logged into QF at the same time, although I wouldn’t advise this unless you are working on completely separate areas as it may cause some issues.

Any item you add after the VAT quarter will be completely ignored, so it’s absolutely fine to do this.

Great, thanks again and to confirm, I have carried out a journal to correct the error by CR the adjusted amount against 2200 (sales tax control) and DR 2202 (VAT liability account). This has left a zero balance against 2200 and corrected the balance in 2202. If this journal is incorrect please let me know.

There is a balance left in the Manual Adj nominal 2204, is this correct?

Yes the top two lines on the example would be adjusted, so that is 2200 and 2202.

When the VAT return is filed there should be a balance on 2202 and 2204 (where adjustments have been applied), the aggregate of this should equal the amount due to/from HMRC. When the liability is paid it can be tagged from the bank and will clear the balance.

Thanks again :smile:

The total amount due (as a refund in this scenario) is sitting in the VAT liability account 2202, and the adjusted amount is in the manual adj nominal 2204, which will remain as a balance once the refund has been received, is this correct?

If you’ve used adjustments then when the refund is issued it will post the full amount to 2202, you would need to journal any difference to 2204. Both should be zero once this has been done. You can do this at the year end or when the VAT refund is tagged from the bank.

Thanks and I thought both should have a zero balance once the refund has been received but this won’t happen. I have used the adjustments on the VAT return, the total refund I should receive is £1758.49, and this amount is all in 2202, Vat liability (with the exception of £95.30 which is due to differing opening balance figures I was given compared to the refund actually received for the previous period). Therefore all of the refund needs to be posted against 2202 to leave the zero balance (or £95.30 as explained above).

There is a further adjusted amount in 2204 (manual adj) so this will still show in 2204 once the refund has been received.

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