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Adjust your VAT liability

You can adjust your current VAT account to correct errors on past returns if they're:

  • below the reporting threshold
  • not deliberate
  • for an accounting period that ended less than 4 years ago

Reporting threshold:

You can adjust your next VAT Return if the net value of the errors is £10,000 or less.

You can also adjust your next VAT Return if your error amount is up to 1% of your box 6 figure (up to a maximum of £50,000).

You must report any errors that do not meet the above conditions to HMRC.

When you submit your next return, add the net value to box 1 for tax due to HMRC, or to box 4 for tax due to you.

You must:

  • keep details about the inaccuracy - for example the date it was discovered, how it happened, the amount of VAT involved
  • include the value of the inaccuracy in your VAT account

QuickBooks allows you adjust your VAT return before you submit it to HMRC. However, any manual adjustments you make to your return will impact your VAT control and or VAT suspense account. If you are not sure about making an adjustment we recommend you speak to your accountant. If you would like to make an adjustment, follow the steps included below.

Adjust VAT box 1, 2 and 4

  1. In the navigation bar, click Taxes.
  2. On the VAT page, select Prepare return for the period you are submitting for.
  3. Select Adjust in the VAT line that you want to change.
  4. Choose an Adjustment Date and VAT rate.
    • Note: If you do not select the appropriate VAT code it will not be reflected on your reports or your return.
  5. Select the Adjustment Account ▼ drop-down menu and choose an account.
    • If you are making the adjustment because you received credit and you owe less VAT to the government, choose an income account that you created for this purpose.
    • If you are making the adjustment to include a fine, penalty, or interest on a VAT return, choose an expense account, such as Interest Expense or Non-deductible Penalties.
  6. In the Amount section, enter the amount of the adjustment.
  7. Enter a memo to describe the adjustment. Although optional, this is good practice as it will help to identify the adjustment if needed.
  8. Select Save.

Adjust VAT box 6, 7, 8 and 9

Note: If you are on Flat Rate VAT you will not be able to adjust these boxes. Speak to your accountant for assistance while we work towards delivering this feature to you.

  1. Go to Taxes.
  2. On the VAT page, select Prepare Return for the period you are submitting for.
  3. Select Adjust in the VAT line that you want to change.
  4. In the Amount section, enter the amount of the adjustment.
  5. Enter a reason for this adjustment. Although optional, this is good practice as it will help to identify the adjustment if needed.
  6. Select Save.

QuickBooks will automatically post a journal for you. The journals created by QuickBooks from adjusting box 6 to 9 can be found in the audit log or through the search option as soon as they journals have been posted.

What happens after you enter a VAT adjustment?

QuickBooks automatically adds a journal entry to show the adjustment. The next VAT return you file will include the adjustment. You will see the adjustment amount on your return against the box you have adjusted. The adjustment is shown as a journal entry under the related section of the VAT Detail report.

VAT adjustment journal for box 6

Adding an adjustment to box 6 will create a credit and debit to your VAT suspense. This will be created with a default VAT code of Exempt (Sales) hence impacting on the net value of sales.

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VAT adjustment journal for box 7

Adding an adjustment to box 7 will create a debit and credit to your VAT suspense. This will be created with a default VAT code of Exempt (Purchases) hence impacting only the net value of purchases.

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VAT adjustment journal for box 8

Adding an adjustment to box 8 will create a credit to your VAT suspense with default VAT code of 0.0% ECG (Sales) and debit to the VAT suspense with default VAT code of 0.0% Z (Sales).

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VAT adjustment journal for box 9

Adding an adjustment to box 9 will create a debit to your VAT suspense with a default VAT code of 0.0% ECG (Purchases) and credit to the VAT suspense with default VAT code of 0.0% Z (Purchases).

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