Can I split a bank-fed VAT direct debit payment between the VAT return amount and the late payment penalty?

tonyglasbey · ‎September 17, 2024

My last VAT was paid by direct debit but late as there wasn't enough in the bank to cover it. HMRC took the VAT return amount plus the late payment penalty in the one payment. I can find no way of editing the VAT payment to split out the penalty. What I've done is "pay" the return in the VAT Centre by cash, transferred the bank payment to the cash account and written off the difference (the penalty) to Sundry Expenses, but this is hardly satisfactory. Any suggestions

tonyglasbey · ‎September 17, 2024

Thanks, Georgia. Actually, the query is on behalf of a client rather than myself. It was having to exclude the bank-fed transaction that I was trying to avoid to keep the bank rec simple. But if that's your recommendation, so be it. I notice that when paying suppliers it's possible to pay more than the value of invoices and allocate the excess to a category, and I thought that this should be possible when recording an overpayment of a VAT return in the VAT Centre. But, sadly, not so. Perhaps this functionality could be considered in a future upgrade of the app.

My way of dealing with it, through an intermediary (Cash) account is actually effective, but still a bit clunky, so I'll do it your way. Thanks again.

Tony

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GeorgiaC · ‎September 17, 2024

Hello and welcome to the Community, tonyglasbey

When recording VAT payments in QuickBooks, it's important to use the Record payment function against the VAT return. This ensures that the amount posts to the default VAT accounts (the VAT suspense account) in the background. This also makes sure that your VAT payable shows as zero.

The record should be as it happened in real-life, so you would choose the bank account that the payment was taken from and the date and enter the amount (of the VAT payment only, not including the penalty) on the Record VAT payment screen.

The penalty can then be recorded separately using an expense (from the + New button). You can create HMRC as a supplier. If you're unsure what account to use on the expense, we recommend contacting your bookkeeper or accountant for advice (the VAT control and VAT suspense accounts would not be used here).

If the records do not show a match to the downloaded transaction in your bank, exclude the transaction instead. As the two records are already in QuickBooks, you'll still be able to reconcile your bank account.

For further tips, you can check out our guide on recording VAT payments in QuickBooks Online. We'll be here if you need any additional support!

tonyglasbey · ‎September 17, 2024

Thanks, Georgia. Actually, the query is on behalf of a client rather than myself. It was having to exclude the bank-fed transaction that I was trying to avoid to keep the bank rec simple. But if that's your recommendation, so be it. I notice that when paying suppliers it's possible to pay more than the value of invoices and allocate the excess to a category, and I thought that this should be possible when recording an overpayment of a VAT return in the VAT Centre. But, sadly, not so. Perhaps this functionality could be considered in a future upgrade of the app.

My way of dealing with it, through an intermediary (Cash) account is actually effective, but still a bit clunky, so I'll do it your way. Thanks again.

Tony

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Can I split a bank-fed VAT direct debit payment between the VAT return amount and the late payment penalty?