Hi, I made an error on my last VAT return, underpaying by about £1,500. I have reported this to HMRC, and they have told me to pay the shortfall on the next return. I can’t see a way of doing this other than adding £7,500 to the sales, which will mean at a VAT rate of 20% I will pay an additional £1,500. There must be a better way of doing this … help please.
Whatever the error was in your last VAT return, if you missed something off/ included something that you shouldn’t have then you can just make an adjustment on your next return to reverse this.
How do you make an adjustment?
When you’ve created the return there are boxes to make adjustments in each box, you just need to click the little pencil icon and enter the figure and any notes in the boxes that appear:
Depending precisely what sort of error this may even correct automatically - if it was one or more invoices you hadn’t logged before you submitted the return but you have now created them, then they should be picked up by the next VAT return without you having to do anything yourself. If you’ve claimed purchases that you shouldn’t have then credit-noting those will automatically feed into reducing your box 4 for the next return, etc.
I have clicked the red triangle by box 1 and it says - Adjustment narrative and amounts are not sent to HMRC electronically. Which is not much use.
There is also no pencil icon
Why isn’t it? The adjusted total is what the HMRC are sent. They aren’t interested in all your notes and calculations, that’s all stored in Quickfile for auditing later if required.
Which return are you looking at? You can’t adjust the one you’ve already submitted, this is for your next return in a few months time.
I’m looking at the next return which is not submitted yet. I wanted to make it clear to HMRC that the amount of VAT due includes the £1,500 underpaid on the last return, but can see no way of doing this.
There is no way of doing this (not just in QuickFile - there is genuinely no way to send additional information along with your VAT return). The only thing that the HMRC APIs receive is the identity and VAT number of the submitter, which period the submission is for, and the total numbers in boxes 1 to 9.
You’ve already told them about the error, they’ve told you what to do to fix it, and as long as you keep records to show what you’ve done if they ever choose to audit you retrospectively in future then that’s all you need.
Hi Ian, thank you for your replies.
I understand what you are saying, but with the VAT rate at 5%, the only way that I can see of paying an additional £1,500 is by adding £30,000 to the sales figure!
I can’t see any other way. Can you?
What was the cause of the underpayment? Was it for example, reporting lower sales figures than what actually happened?
If this is the case, then adjusting the figures is the correct approach. For example:
The adjustments adjust the figure submitted, not the figure used to calculate the VAT. If you owe an additional £1,500 you add £1,500 to the VAT return submitted. You don’t add in £30,000 to the sales nominal.
Hi Mathew, the underpayment was due to mistakenly thinking the VAT rate had dropped to 5% for May and June I can’t of course adjust the submitted return, so the only way that I can see of paying an additional £1,500 is by adding £30,000 to the sales figure!
I can’t see any other way. Can you?
so the only way that I can see of paying an additional £1,500 is by adding £30,000 to the sales figure for the August/September/October return.
Is there another way please?
As has been said, that is how it works. The figures are essentially blindly submitted to HMRC. There isn’t another way.
However, as you mentioned you thought the VAT rate had dropped does this mean you were issuing invoices with 5% sales VAT on them for this period? This will also need fixing and the invoices will need reissuing to the customers as their returns will also be wrong. Once you fix the invoices though the VAT will sort itself out, there will be no need to adjust anything.
Not sure op can fix the invoices if they are already locked from the previous vat return.
The easiest method in my opinion is as follows.
First work out if you can re bill the customer the 15% missing vat. It so great
Then create a new invoice, but you will need to have a few lines on it as to break up the vat element.
You’ll need to add an item with a gross total that gives you the vat amount underpaid.
You need need a new line total with a negative net amount and select no vat.
This should leave just the vat element being due on the invoice and added to the next vat return.
Now if your customers can pay the missing vat great tag the payment to it. If not then you’ll need to tag a payment to it directly, either from the director loan account or proprietor drawings.
Either way you’ll have the missing vat added back.
Or issue a credit note for the full amount of the original invoice, hold the funds on account and then reissue the invoice with the same gross total but the correct VAT element then pay it with the account credit.
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