VAT Control and reclaims

ESIan · ‎March 31, 2022

I have a large balance in my VAT Control Account that I'm trying to reconcile. The issue comes from various filings done previously in Sage where "Tax Control Account" and "VAT Liability Account" both map to VAT Control in QB. Because I've been using VAT control and VAT_Suspense to manage filings automatically now in QB, I am creating journal entries for past Sage filings where the payments were not received correctly.

However, when I Credit VAT Control for a reclaim (say for £761), this increases the Balance which is actually increasing the liability by 761, and not decreasing it. So for every reclaim, the VAT Control liability goes up.

The alternative is to debit VAT control for a reclaim which decreases the VAT control balance correctly, but in turn VAT_Suspense increases in balance to exactly the same value as the repayment from the bank account.

So I either end up with double the value in VAT control or in VAT suspense.

It's almost as if the sign needs to change on the HMRC payment when transferring it from Bank Account to VAT_suspense

paul72 · ‎April 01, 2022

Hi @ESIan

I'll be honest - from your posts, I have absolutely no idea what you're trying to do.

However, I have looked at VAT returns/journals posted in QBO & if I can walk you through, you should be able to figure it out.

Each VATable transaction entered in QBO posts the VAT amount to VAT Control.

Sales VAT is owed to HMRC - this posts as a positive number

Purchase VAT is owed by HMRC - this posts as negative.

So, the VAT Control account balance is the amount owed to HMRC. As you say, it's a Liability Account so that makes sense.

If I owe HMRC £1000 in VAT at the end of the quarter, the VAT filing process in QBO posts a journal from VAT Control to VAT Suspense - effectively just sweeping the owed balance from one to the other, they're both Liability Accounts:

VAT Control Debit £1000

VAT Suspense Credit £1000

The liability sits in VAT Suspense until I pay HMRC. If you want to think in terms of journals, I guess the payment is a journal from bank account to VAT Suspense.

Hope this helps.

View solution in original post

MaryLandT · ‎April 01, 2022

Thank you for contacting us, ESIan.

Let me share some insights why the VAT Control Account is showing a large balance.

This can happen when you manually added transactions with a VAT code. The Vat control is where all the transactions post the Vat element.

To file previous tax returns, you’ll have to unfile first the payments you've made before using QuickBooks. The process requires account verification which can’t be done in the Community for security reasons.

I recommend contacting our QuickBooks Live Support Team. You can either sign up for a callback process or chat directly with a support agent.

Before contacting them, make sure to check the filing frequency since this will determine when you’re going to submit the return. To review the setup, please follow these steps.

Go to Taxes on the left panel.
Click on the drop-down for Edit VAT, then select Edit Settings.
In the Filing frequency section, check the period.

I'm adding these articles to help manage your VAT returns.

Let me know know if there's anything else I can help you with correcting your tax returns. I'll be right here to provide the information that you need.

ESIan · ‎April 01, 2022

Thanks. Well, I am familiar with VAT Control and yes, all VAT collected and paid is accumulating there and I am using VAT suspense for the QB filed returns.

But my question is this;

VAT Control Balance £1000 (a liability so it means -£1000)

I create a Journal for a reclaim of £100

JE: VAT Control credit £100

JE: VAT suspense debit £100

New VAT Control Balance is £1100 - a greater liability, when surely it should have gone down.

Same is happening for previous HMRC repayments. Where there is a matching repayment of £100 say into the bank account that is then transferred to a liability account. The bank account is debited with the repayment amount and the liability account is credited, but the balance (liability) increases rather than decreases.

Confused

paul72 · ‎April 01, 2022