Previous Prepayment doesnt allow correct amount to account on new invoice

If you’re looking to remove that £12.50 from the invoice, you would need to detach the payment. It does sound like this was prior to your VAT registration so it shouldn’t be locked.

Firstly, view the invoice and then click the “Payments” link at the top (this is directly beneath the modify button etc.)
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This will show you a list of associated payments. View the payment with the £12.50, and providing it’s not locked in anyway, you will see a red detach button.

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The system will automatically generate the return based on the data entered. As I mentioned above, I’m not an accountant so I can’t confirm whether showing the full £2,000 would be correct or not. If as it stands you need to show the £2,000 however, you can make a manual adjustment. Please see our guide for further information on this.

I would refer to either your accountant or the HMRC guidance notes to ensure this is completed correctly. I’ve included a link below to HMRC’s guide to completing a VAT return, which will hopefully help: