My Balance Sheet showed an amount of £23,232.90 VAT Liability (2202) under Current Assets and an amount of £25,758.51 Sales Tax Control Account (2200) under Current Liabilities.
I think the reason for the VAT Liability under Current Assets was because for this period I hadn’t been using QF to do the VAT returns and so I’ve journaled £23,232.90 from VAT Liability to Sales Tax Control Account and also adjusted for the Flat Rate VAT.
This has removed the £23,232.90 VAT Liability from Current Assets and reduced the Sales Tax Control Account amount under Current Liabilities to £2,290.93.
The £2,290.93 figure is the difference between the total of the VAT on the Sales invoices in the period [£25,305.33] less the above journaled £23,232.90 and FRS adjustment [£23,467.58].
The correct amount of VAT owed at the period end date however is £1,549.34 not £2,290.93.
My question is how can I journal out the difference so that the correct figure is showing on the Balance Sheet?
Are you using the cash based method for your flat rate turnover? If so I wouldn’t expect the sales tax control account to precisely line up with the vat return as the former is based on the amount you have invoiced in the period but the latter is based on the amount you were actually paid.
I’m looking at the end of my accounting period (31/03/19) when I know that the correct amount of VAT that was owed at that time was £1,549.34 and not the £2,290.93 that is showing as Sales Tax Control Account under Current Liabilities. For some reason there is the discrepancy of £741.59.
The Balance Sheet on the last day of a VAT quarter (31/05/19) shows:
Sales Tax Control Account: £394.14
VAT Liability: £6,347.92.
Total liability: £6,742.60
The actual VAT due at this time was £6,019.44.
The total liability for both is now £722.62 higher than the correct amount of VAT owed - not sure if this is mainly due to the £741.59 discrepancy as at 31/03/19 although figure is slightly different.
As this is for a previous year all I want to do is get the Balance Sheet showing the correct amount of VAT owed as at 31/03/19 so that the Balance Sheet for my last accounting year (y/e 31/03/20) is showing the correct figures for the company’s accounts. I’m just not sure what I can journal the discrepancy of £741.59 to without affecting something else!
If you’re on flat rate then the difference would usually be to do with the flat rate adjustment - sales tax control holds the “20% of net” VAT that you’ve charged on each sale, but the VAT liability is calculated from your flat rate times the total gross VAT-inclusive turnover for the quarter, and when you save a FR VAT return in QuickFile it moves the difference to P&L under “flat rate sales adjustment”. But you say you’ve adjusted for that already.
The other possibility is if you had any capital purchases over £2,000 where you’re entitled to reclaim the VAT (the VAT return would journal this VAT from purchase tax control to VAT liability), or possibly EU acquisitions or reverse charge transactions, but not using flat rate myself I’m not 100% sure how those are supposed to be handled.
Thanks - that is exactly as I understand it. I can only think that its something to do with when the VAT returns weren’t being done through QuickFile - I’ll go through my calculations again to see if I made any errors. I’ve checked the Opening balances from 2018 and they are correct.
If that doesn’t find the problem I’m tempted to delete all transactions prior to 01/03/2019, which was the start of my first VAT period using QuickFile to do the VAT return.
Were there any late entries posted after the VAT return was completed, with a date before the year-end as these would affect the balance in your VAT accounts?
So, you started using QF for your VAT returns from 1/3/2019, so your first VAT return was 31/5/2019? Have you been using QF for your bookkeeping prior to this or another system? You say you’ve checked the 2018 balances so is the whole of your financial year’s transactions on QF for 2018-19? How did you do your previous VAT returns for the year?
Apologies for all the questions, but it’s hard to know exactly where the issue lies without knowing the background.
I first started using QF from 01/04/19 but added all transactions from 01/04/18 on to QF with a journal for opening balances prior to 01/04/18, as below:
The first VAT return on QF was from 01/03/19 with the first VAT return using QF on 31/5/2019. Prior to 01/04/19, I was just using Excel spreadsheets and VAT returns up to p/e 28/02/19 were submitted using the HMRC website.
Not sure if the problem is something to do with the opening balances - the VAT Liability figure is for VAT owed for p/e 28/02/18 as per the VAT return done on the HMRC website. I originally included in the opening balance for VAT that would be owed from supply invoices in March (my accounting year is from April to March) but this did not give the correct figure either.
I’ve checked that the transactions from 01/04/18 to 01/04/19 that I’ve added from the Excel sheets to QF are correct. For each VAT period end I’ve also done a journal for the FRS adjustment, etc, as QF does automatically when VAT return is via QF, example below:
I’m thinking that my only option is to remove all transactions prior to 01/03/19 so that all VAT returns are done via QF. In reality these previous transactions don’t need to be QF as I have the Excel records.
Please advise however if there is a glaring mistake with the opening balances (or anything else) that you can see!!.
Have you checked that QF has treated the VAT on your entries from 1/4/2018 in the same way as you entered them on your Excel spreadsheets? i.e. is there a difference between an earlier VAT return you submitted via Excel and the HMRC website and what it would have been if you had submitted it through QF. I’m afraid the only way to check this really is to go through all your transactions and compare the Excel returns with the QF data!
Otherwise, unless you really want the transaction history on QF, I would delete all the prior data that you have on Excel, and simply load the opening balances from the point at which you want to start using QF in full.
Reconciling VAT returns at year-end when the return period and your financial year-end aren’t co-terminous can be a bit tricky, but it shouldn’t really be that far out!
