My first MTD VAT Return Shows Incorrect Turnover

Has anyone any idea why when I try to prepare my first VAT return on Quickfile, the turnover for the quarter: February to April shows £343 more than it should?

For example, say I have 13 weeks of £1000 sales, and these correct amounts are shown on my Sales page in Quickfile, which should total £13,000, yet when I prepare my VAT return for the Period 1st Feb 2022 to 30th April 2022, it showed, e.g. £13343? As I’m on a Flat Rate of 10%, it would show £1334 VAT to pay, instead of £1300.

This is my first MTD VAT return using Quickfile. I’ve tried adjusting the Start date (you don’t seem to be able to edit the End date, is that right?) to prior to the 1st of Feb, or later than 5th Feb, to see if it’s picking up the wrong invoices, but that showed too little an amount, i.e. less than the £1300. But I can’t work out what it’s doing. If it was including or excluding an invoice that it shouldn’t, the difference would be more like £1000 anyway, not just £343? And the end of my quarter was 30th April which fell perfectly on a Saturday, i.e. there shouldn’t have been any overlap between weeks or periods.

I don’t know if the actual pay dates for these invoices have any impact? i.e. the first invoice of this quarter was for w/e 5th Feb, and was actually paid on the 16th Feb; does this make a difference? I would’ve thought Quickfile goes off the invoice dates? All 13 Sales are shown as Paid and Tagged, so I don’t know what’s going on.

Can you help, please?

Hi @tonybrown

The £13,000 figure - is that your net (ex. VAT) or gross (inc. VAT) income?

Flat rate is calculated based on the gross income.

So if you have, for example, the below totals -
£13,000 net income

  • VAT @ 20% = £2,600
    = £15,600 gross income

The flat rate percentage of 10% would then be applied to the gross income (£1,560), and that’s how much VAT is due.

Hopefully that makes sense and helps, but if you’re seeing another issue, let us know and we can take another look for you.

The £13,000 is my GROSS income (including VAT). The Net would indeed be 20% less.
But on the VAT Return it shows, e.g £1334 in Boxes 1, 3, and 5, with, in Box 6, a Flat Rate Turnover incl VAT of £13343 (which should be £13000).
I’ve been doing VAT for over 5 years, but this is the first time using MTD with Quickfile.

The “export” button at the top of the VAT return form is your friend here, it’ll generate a CSV telling you exactly which items make up the totals for each box.

Thanks, that’s great.

I exported it, and it’s as I suggested at the end of my original query; the return goes off when the invoices were actually paid rather than the invoice dates. So everything is 2 weeks out. So it includes 2
invoices from the previous quarter, and doesn’t include the last 2 invoices of this quarter.
Is it possible to change the end date? Cos, currently the return is til 30th April, but the last 2 invoices weren’t paid until the 5th and 11th May - which I need to include for this quarter.
Failing that, can I manually adjust the amounts on the return so they actually reflect the true figures for this quarter?

That is how it is supposed to work if you’re on cash accounting, which is what QuickFile assumes by default.

If you’re not actually intending to use cash accounting then you need to change the flag in your QuickFile VAT settings to “accrual”, which is the name QuickFile uses for what HMRC call “traditional accounting” based on the invoice dates.

Great! That’s solved the problem. Thanks!

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@QFSupport there have been so many questions in the last few weeks from people confused between cash and accrual accounting, maybe it’s time to change the vat settings form so that for first time set up the user must actively choose one or the other (with a popup or doc link explaining the difference), rather than having cash accounting selected by default?

Yeah, good idea. And perhaps have it default to accrual.

No, I’m suggesting not to have a default at all, and not let the user save the form until they’ve actively chosen one of the two options. Making the right choice between these two options is as critical as getting the VAT number right, it shouldn’t be something you can gloss over with a default choice.

So this is how it is currently displayed.

Yes I agree, if it’s causing confusion it would make sense to remove the default and add some additional popup bound to a link “What’s the difference?”.

I’ll recommend this to the dev team.

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Thanks. I’d suggest wording along the lines of:

If you’re already VAT registered and moving to QuickFile, select whichever accounting method you already use. If you’re newly VAT registered and don’t know which to select:

Cash Accounting

  • you only have to pay HMRC the VAT on your sales once your customers have paid you
  • but you can’t claim back the VAT on your purchases until you have paid your suppliers

Accrual (“traditional”) accounting

  • you have to pay HMRC the VAT on your sales as soon as you have invoiced the customer, even if they haven’t yet paid you
  • but you can reclaim VAT on your purchases as soon as you have an invoice from the supplier, you don’t have to wait until you’ve paid for them

Cash accounting can help your cashflow if you tend to pay suppliers quickly but your customers take a while to pay you, conversely accrual can help businesses such as retail where your customers pay you promptly but you pay your suppliers in arrears.