Cleaning up VAT position

kitzy1 · ‎February 16, 2023

Hello

I'm helping a friend get quickbooks set up 2 years after company set up and to get their VAT situation sorted. It's a very simple company set up and i have sorted most but getting stuck on VAT.

They didn't initially submit VAT returns so have made 7 payments of estimated VAT charges as requested by HMRC - these are appearing on the bank transactions but i'm not sure how to categorise them as if i put them as a "Taxes Paid" expense they then appear in the P&L as a cost line item which doesn't seem correct. Please can you advise?

I've then registered for making tax digital and i'm getting a "take action" box top right. This brings up the 2022 VAT return which i need to mark as filed BUT i can see it's clearly wrong. I believe they submitted it offline pre quick books. I think i need to adjust this before i file it but if i adjust Box 1 to reflect the true input VAT for that period i don't know which "Adjustment Account" to select? Likewise for Box 4, 6 and 7. I know the values to type in but don't understand the entry the adjustment account will drive

thanks

Ashleigh1 · ‎February 16, 2023

Hello Kitzy1,

For the adjustment double entry, it will post to the VAT control account and whichever account you select as the adjustment account.

For the VAT payments, if you are going to mark the periods as filed that you have the payments for then you should mark them as filed first then record the payment for them against the filed period.

If you aren't going to mark the periods as filed first then it would be best to speak to an accountant about how to record the historic VAT payments without having the VAT periods filed in QBO.

View solution in original post

AbegailS_ · ‎February 16, 2023

Hi there, @kitzy1. I'm here to lend a hand.

QuickBooks allows you to adjust your VAT return before you submit it to HMRC. Since we can't recommend an adjustment account, I suggest you coordinate with your accountant.

For the payment that was made outside QuickBooks, you can create an expense account and choose check or expense transaction for the payment.

See the screenshot below for your reference.

You can read through this article for more details: Make VAT adjustments in QuickBooks Online

Nonetheless, if you already enter the historical transaction, you can record the payment in the tax section. Let me show you how.

Go to the Taxes menu.
Choose the VAT tab.
From the Returns section, locate the returns you've paid.
Click Record payments from the Action columns.
Enter the VAT payment details.
Click the Save button.

Let me also add this article that you can read for future reference in submitting your return: Submit a VAT return to HMRC using MTD in QuickBooks Online

If you have other tax concerns, let me know in the comments below. I'll be sure to get back to you.

kitzy1 · ‎February 16, 2023

Thank you for the fast response

Understand you can’t advise me which adjustment account to use but can you help me to understand the double entry so I can make an assessment please on where to select?

on the payments made outside QuickBooks I’ve done as you suggested but they now show as an expense in the P&L the same as postage and admin costs do. Is this correct? I would have expected vat related transactions to not impact the P&L?

thanks

Ashleigh1 · ‎February 16, 2023

Hello Kitzy1,

For the adjustment double entry, it will post to the VAT control account and whichever account you select as the adjustment account.

For the VAT payments, if you are going to mark the periods as filed that you have the payments for then you should mark them as filed first then record the payment for them against the filed period.

If you aren't going to mark the periods as filed first then it would be best to speak to an accountant about how to record the historic VAT payments without having the VAT periods filed in QBO.

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Cleaning up VAT position