How to raise invoice with VAT when deposit has been paid previously?

[rachel22]

My client takes deposits for services that will taken place in the future.  When the deposit is received VAT is due so it's coded
e.g. Dr £120 Bank
Cr £100 Deposits account
Cr £20 VAT control.
When the invoice is raised a deposit is taken off in the box at the bottom but this is done after VAT (as the invoice shows the full VAT amount).
e.g.
Dr Bank £480
Dr Deposit £120
Cr Sales £500
Cr VAT £100
This means that the VAT account has a credit of £120 as the VAT on the deposit has been included twice.  
Is there any way of getting the system to push £20 of this amount back into the deposit account?  I can't just journal the £20 as, along with this the sales on the deposit will have gone into Box 6 of the VAT return twice.  
These 2 transactions can be a year or more apart.

[MaryLandT]

Hello there, @rachel22,

I've got the steps to reflect the $100 VAT return without making an adjustment.

You'll need to deposit the $100 amount with no VAT hitting the debtors accounts. Then, create an invoice amounting to $500 and apply a 20% standard VAT. This will make the invoice a total of $600. 

Once done, you can then receive the payment to link the deposit and the invoice.

If you need to reconcile your bank or credit card account, feel free to read through this article for the detailed steps: How to Reconcile an Account in QuickBooks Online.

Let me know if you need clarifications with the solution above. I'm always around here in the Intuit Community to help.