Am about to submit another VAT return. My accountant has asked me to move from accrual to cash accounting. I have changed the information in the VAt details section and downloaded to Quickfile calculations.
Obviously, there is information there that has already been submitted previously. I am just not sure how to change the information so it just includes the relevant information so I am not duplicating!
I note from a previous post that changing the date? but not sure what date and where.
Your help is appreciated.
is this the first return you will be creating? if you have already submitted a quickfile and have this saved then it will lock those transactions. They shouldn’t be brought into the new return?
No its the second, submitted one in April via the digital submission system.
The cash statement is showing sales for the last quarter, it is also showing all purchases in the last quarter as well as this.
When looking at the accrual statement that is showing everything from April as expected.
Sorry, I’ve just double checked and because your previous return was accrual it would have locked the Invoices. Now that you’re cash, it won’t be looking at the invoices but the payments which haven’t been locked.
You will need to make some manual adjustments on your first return to take this into account but then going forward it should work out all ok.
Problem is that it is looking at the locked Sales and Purchases.
This is the problem with switching between the schemes. It becomes very complicated.
The first VAT return will be very messy because it will look at all of the ‘Cash’ transactions from the VAT start date. Even if you were to change the start date some of the transactions that are picked up may have already been included if the invoice it relates to was dated the previous period when you were Accrual accounting.
Hi , Sorry I have not been very clear.
My first VAT was accrual.
Second VAT I want to change to Cash.
The downloaded statement to check for this current VAT period (Cash) shows ALL sales from the previous VAT (Jan - March) - including those that were paid in that VAT period as well as what I would expect. These sales that were invoiced and received payment for in the period Jan - March should not be carried over? They should be locked?
Ditto: surely none of my purchases which were bought and paid for in the last VAT period should be shown.
When you submit an accrual accounting VAT return it locks the sales/purchase invoices but not the payments. When you submit a cash accounting return it locks the payments but not the invoices.
So now you’re trying to generate your first cash accounting return it sees all the payments since your start date as unlocked and includes them.
There will almost always have to be manual adjustments made when you switch schemes to make sure everything is accounted for exactly once and nothing is either missed or counted double.
Thank you , understood. How does one do the manual adjustments!
There’s a little arrow in each box on the vat return form that lets you enter adjustments. Anything that affects the total amount of VAT payable will post the contra entry to the “manual adjustments” nominal, which you will then have to journal back to the appropriate places (probably sales and purchase tax control accounts in this situation).
In the notes box it says
‘Adjustment narrative and amounts are not sent to HMRC electronically’. can I clarify that what it means is if the amount (eg VAT due on sales say £5000) has to be reduced by £2000 then it’s the £2000 is not displayed and sent but just the new Vat due on sales £3000.
Not sure what you mean by journal back to the appropriate places, could you send me a HowTo link please.
You’re correct that all HMRC receive is the final adjusted numbers, not the original calculations or the amount by which each box was adjusted.
A VAT return is just a special kind of journal - the calculated box 3 total gets debited to sales tax control and credited to vat liability, and the calculated box 4 total gets credited to purchase tax control and debited to vat liability, which leaves the vat liability nominal equal to the calculated value of box 5. Manual adjustments work similarly, but they use the “manual adjustments” nominal for the contra entry.
So suppose you work out that you need to adjust box 1 down by £1000 and box 4 down by £750, so reducing box 5 by £250. This will adjust the vat journal by debiting £250 to vat liability and crediting the same to manual adjustments. Now you know that in this case the £250 difference needs to go back to the sales and purchase tax control accounts (because you’re removing items that have already been accounted for in the previous return), so to get everything straight you would need to make a new journal with
- 250 debit manual adjustments
- 1000 credit sales tax control
- 750 debit purchase tax control
QuickFile can’t do this automatically because exactly where the adjustments need to be moved to depends on why you’re adjusting, which is something only you can answer.
That is really useful many thanks
Apologies I also see that (its the same for both) in the downloaded csv file it does not account for any Sales that are not VAT Rated? Should this be the case. Would not the amount that is invoiced even if no VAT needed be still included in the Total Sales exc VAT?
There are some exemptions to this, so a manual adjustment may be required.
I would double check with your accountant just to be sure (I’m not one)
Hi Many thanks
I was just surprised given the Cash accounting downloaded CSV file included the previous sales (as previously used accrual) but not the one that I would have expected. Does this mean that the system does not pick up any sales that do not have VAT at all?
HMRC rules say that box 6 should include all sales including zero rated and exempt - I believe QuickFile includes zero rated (“no VAT”) but doesn’t include anything marked exempt or out of scope.
The issue about it including previous sales is as I mentioned in my first reply above - your previous accrual return locked the invoices but not the payments, so this cash return thinks the unlocked payments are ones you entered late (after submitting a previous cash-basis return for that period) and pulls them forward into this return. This is normally a desirable thing to do but it trips you up when switching accounting schemes.
Hi Many thanks
Looks like it is the exempt as you say that it is not including, I wonder why?
Many thanks again for your help
If you are making exempt sales then definitely double check all this with your accountant as I guess you might find you have to make further adjustments for partial exemption (not claiming back the full VAT on all your purchases).
It is just one invoice that is exempt and have made the necessary adjustment. Have spoken to accountant.