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Journal help for HMRC payments for a novice

I am very definitely not an accountant but just helping a friend with his accounts - a very simple business with just him as an employee who is also a director. And have got myself into a total year end pickle - please be kind!
We have just finished the 2nd year of trading and I have just filed accounts with HMRC / companies house. However, looking at the balance sheet I have entirely overlooked making journals for any payments to HMRC for anything over the last 2 years, so all showing as assets.
1).I’ve simply added an entry to the corresponding bank transaction e.g. net salary and HMRC PAYE payment, and now I have PAYE 2210 showing in assets and liabilities. Payroll I run in separate software and then have just added the bank transactions ( I’ve only ever managed simple accounts on spreadsheets before rather than through software so i’m a total journal novice.)
2) for VAT I’ve submitted VAT via quickfile and then tagged the bank transaction as VAT payment so I think thats OK, though there is always a liability showing at year end as the VAT year end and accounting year end don’t match. - I think this is fine…?
3) for corp tax this is showing as a credit in 2201. I’ve submitted through HMRC and then just tagged the bank transaction for the payment to them when it was made.

I’ve looked through the knowledge base and I’m OK with what I need to do going forward to enter these transactions correctly (more or less), but what do I need to do to journal out these entries for the last 2 years so the balance sheet is right?
I’m terrified of adding in journals which just make the problem worse.
And sorry for being such a numpty, hopefully someone takes pity on my total ineptitude. :pray:


You need to unlock the previous year and add the journals at year end to reverse those entries.

If you know what you should do moving forward then you should be able to apply the same method to the previpus year.

Vat is correct so don’t touch that.

But you need to add journals for corporation tax and possibly paye.

Also this will probably change the balance sheet you submitted to companies House and hmrc. It’s likely these won’t be material changes and doesn’t affect tax position so you don’t need to file amendments, just make sure to include the previous year corrections in the comparatives for next year’s submission.

Thank you. I’ve unlocked the previous years, and journalled the Corporation tax successfully, and also sorted what should have been an opening balance for VAT liability, for returns made manually and now those are both sorted. Phew!
For PAYE, do I need to reverse out all the entries and add in as gross wages / PAYE / NI / pension etc, or can I simply add a journal to balance out the PAYE showing as a liability , and start to enter the PAYE properly from next month?

Just create a journal to balance the paye I guess. The other method would just be a journal to move everything out to gross pay, so I’m guessing it would be pointless to do 4 journals now just to correct it.

Can I literally just make a credit to match the debit on the same nominal code to do this, then it nets out? or is there an opposite balancing nominal I should use?

Actually your right. I’m wrong. You’ll need a balanced journal so you’d probably need to create one that had the expected net wage, paye pension. Then a matching entry for gross pay.

Cr net pay
Cr paye
Cr pension
Dr gross pay

Dear Laura.

I have a simpler solution for you.

I was in a similar situation a couple of years ago, and basically could not keep up with the accounts, returns, corporation tax etc. In the end I opted to get an accountant. Plenty to chose from, I’m sure you’ll agree. To be honest, some that I approached, wanted to charge extortionate fees. I accidently came accross one, who I have to say is the bees knees.

I have never met him, spoken on the phone a couple of times, most communication via email. Everything done electronically. He gets everything in order, saves me money and advises the best way to go about things legally.

I have since recommended him to others who all seem to be happy with the service.

All in, including VAT returns and self assesment just over £300/year.

Very little for me to do, freeing me up to do other things, like generating more income. Well worth its weight.

Good luck. Ian.

I simply don’t know how anyone can charge £300 per year to do all vat and self assessment. You either have hardly any receipts every month, or they are very cheap.

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