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Senior Explorer *

VAT paid twice, but cannot use the resulting credit

Hello,

 

In the transition to MTD made a VAT return and paid it.  I hadn't realised that HMRC had also taken the same amount vis direct debit, so my VAT account with HMRC was in credit. I entered the accidental payment as a 'Cheque' payment, allocated to a 'Miscellaneous Expense' account.

 

I have filed my most recent return and because my HMRC account is in credit, they are reducing the amount they will collect using the direct debit.  That's fine, but when I go to record the DD payment within QuickBooks I am not seeing an associated 'Credit' which I can use to offset the amount owed.  It is only allowing me to record the full transaction amount.  How can I tell QuickBooks to use this credit balance to help pay for my VAT bill?  It doesn't seem to work as one would expect with a regular supplier.

 

Thanks,

 

Angus

Solved
Best answer 08-09-2019

Accepted Solutions
Senior Explorer *

Re: VAT paid twice, but cannot use the resulting credit

The simplest solution is as follows:

  1. Record the accidental payment as a Cheque payment to HMRC, but make it as a payment to Accounts Payable for HMRC as well.  That way it will simply appear as an available credit.
  2. Process VAT in the normal way, and when I come to pay simply apply the duplicate payment as a credit.
  3. Presto! The final amount owed matches the amount collected by HMRC.

Don't know why I didn't think of that in the first place.

5 REPLIES 5
QuickBooks Team

Re: VAT paid twice, but cannot use the resulting credit

Hi @angusk572,

 

Welcome to the Community. Let me share a few insights about how to handle the previous overpayment given by your sales tax agency so you can allocate the amount to pay for your VAT bill to match the reporting as well.

 

Let's Use the Credit Note and enter a negative sales tax adjustment to move money out of your Sales Tax Liability account. Here's how:

 

  1. Go to the Customers menu.
  2. Select Create Credit Notes/Refunds.
  3. Choose a customer name. This is required and if you don't want to use a real customer, you can click Add New to enter a customer name. You can enter "Accountant Use Only".
  4. Click the first empty line in the Item column. Then:
  • Choose the sales tax item you want to adjust.
  • Enter the amount of the adjustment in the Amount column.
  • Click Tab or Enter.

When a message "Changing the amount of a tax line item may cause your sales tax reports to be incorrect." prompts, click OK.

     5. Repeat Step 4 for any other sales items to be adjusted. Then, click the next empty line, and:

  • Select a Discount item.
  • Enter the total amount equal to the adjustment(s) entered in the first line in the Amount column.
  • Click Tax in the Tax column.

      6. Ensure that the total amount is $0.00. Then, click Save & Close.

 

As an additional reference, you can also read through this help article: Process sales tax adjustment. It also contains steps about how to enter positive adjustment if you need to increase your sales tax in the future.

 

Please let us know if you have any questions. I'll be glad to get back and answer. Take care!

 

Senior Explorer *

Re: VAT paid twice, but cannot use the resulting credit

Hello, 

 

Thank you for your suggestion. 

 

Is there not a simple way (using a general journal entry, for example) to move the money paid to HMRC (currently in the Miscellaneous Expense account) to one of the VAT accounts and reduce the amount owed that way? Which account is used for the Box 5 total?

 

Thanks, 

 

Angus

QuickBooks Team

Re: VAT paid twice, but cannot use the resulting credit

Hi  angusk572

 

You could create one payment within the VAT centre that relates to both of the individual payments you make, you will of course have to delete the payments you have created. The subsequent VAT period/payments will not have the correct amount displayed however once the credit has been used the period after that will show correctly, the VAT suspense account will also show correctly at this point.

or

Record the first payment as normal within the Taxes section

For the second payment: you can create a prepayment account (a bank account called pre-payments) and post it there, when you create the second expense select the bank account the amount was debited from as normal however in the category section select the prepayments account.

When the time comes to make the payment for next return you will use the prepayment account to make the payment accordingly, say if the next return payment is less than what you have in prepayment account

You will leave the difference in prepayment for next return payment

Senior Explorer *

Re: VAT paid twice, but cannot use the resulting credit

So I can't just adjust the VAT owed or just allocate the payment to the VAT owed?

Senior Explorer *

Re: VAT paid twice, but cannot use the resulting credit

The simplest solution is as follows:

  1. Record the accidental payment as a Cheque payment to HMRC, but make it as a payment to Accounts Payable for HMRC as well.  That way it will simply appear as an available credit.
  2. Process VAT in the normal way, and when I come to pay simply apply the duplicate payment as a credit.
  3. Presto! The final amount owed matches the amount collected by HMRC.

Don't know why I didn't think of that in the first place.