I run a minibus company and our services are zero rated for vat purposes. I have recently taken a booking from a client based in Spain to collect them from the airport and transfer them between various sites here in the UK and then take them back to the airport at the end of their stay. I recorded them as a client and raised an invoice (for the deposit) in the normal way, VAT=0% and tagged the payment in the bank record. When I came to prepare my VAT return the payment had been recorded as (5/6)payment + a (1/6) VAT amount. Why has VAT been applied despite setting the invoice to 0% vat?
Did you tick any of the additional VAT options? Are you on cash or accrual accounting for VAT, and if cash was the payment date and invoice date within the same quarter? I presume if your services are all zero rated anyway then it shouldn’t make any difference whether the client’s address is UK or overseas.
Hello @FulwoodTravel4
I have just taken al look at your account, it is nothing to do with it being an overseas client but more to do with the payment/invoice dates
I can see the payment was logged as 23/10/2023 prior to the Invoice which is dated 02/11/2023
The return period is 1 Aug 2023 - 31 Oct 2023 so as of the end of the return period the Invoice does not exist yet (you will also notice the invoice number is not shown).
The returns would correct them selves once the invoice and payment dates pass (e.g. in this case when you submit the 1 Nov 2023 - 31 Jan 2024 return).
Hi Steve
Thank you for your reply. It explains the problem in precise terms. I will edit the invoice date to the date of the payment which should hopefully correct the issue. Interestingly I thought I had set up prepayments to have 0%Vat, having had a similar issue previously. I can sort it out from here thank you.
Great service and a great accounting system easy to use and full of great features for the non-accountant.
Thanks again
Mark
Hi Ian
Thank you for taking the time to try and help. QF Steve has answered my question, basically because the payment date and invoice date were straddling a VAT period the payment was treated as a prepayment and attracted VAT payment, which would have reversed itself at the next period if I had done nothing more. I’ll change the date of the invoice to be within the same VAT period and it should go away.
Mark
I thought there was usually an option when you tag a prepayment to select the applicable VAT rate, so if you know it’ll eventually be allocated to a zero rated sale you can have it treated as zero VAT in the first place. @QFSteve is this no longer the case, or is the VAT rate option only exposed in certain workflows and not others?
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