Posting directly to the VAT control account

[neilsolaris]

Hi,

I handle the bookkeeping for a company, and we have a situation where a supplier had to register for VAT retrospectively. They asked if we could pay the VAT on a transaction that occurred last year. Since we are also VAT registered, this wasn't a problem.

My question is, can I post the VAT directly to the VAT control account? I use QuickBooks and want it to be picked up on the exception report and apply to the current VAT quarter. This is my plan, but I'm not sure if it will work.

When I make the payment, I'll record a VAT-only transaction dated for today so that it reflects the correct date for the bank transaction.

Then, I plan to make two journal entries to move the VAT to an earlier period (for example, £300 on 30/11/2023). The entries would be:

**Today** - Dr Accruals £300, Cr VAT Control £300
**30/11/2023** - Dr VAT Control £300, Cr Accruals £300

Thank you for your advice.

---

 

[Joyous]

Doesn't QuickBooks have a facility to enter a VAT only invoice?

If not this soluton that might fit the bill.

 

[neilsolaris]

Doesn't QuickBooks have a facility to enter a VAT only invoice?

If not this soluton that might fit the bill.

I know how to create a VAT only invoice, this is not what I'm asking (I do it exactly as described in that link you gave). That's for the info though.

 

[Joyous]

I know how to create a VAT only invoice, this is not what I'm asking. That's for the info though.

Suppose I should have read the whole question. Stopped reading after the second paragraph.

Sorry

 

[neilsolaris]

I suppose I could backdate the VAT expense, and then create a journal

Suppose I should have read the whole question. Stopped reading after the second paragraph.

Sorry

That's ok, I appreciate your help. Most people fall asleep after my first paragraph, so you did well!

 

[neilsolaris]

I suppose one solution would be to backdate the VAT paid in the first instance. It'll be in the wrong place in the bank account, but I could use the accruals account to move the bank transaction to today. That seems a bit clumsy to me, but I think it would work.

 

[Scalloway]

My first thought is just to edit the invoice so the VAT payment goes against it.

I use Quickbooks but the organisation is not VAT registered so this may not work. Also it won't work if the invoice was in the previous financial year which has been closed.

 

[neilsolaris]

My first thought is just to edit the invoice so the VAT payment goes against it.

I use Quickbooks but the organisation is not VAT registered so this may not work. Also it won't work if the invoice was in the previous financial year which has been closed.

Thanks for the suggestion, Scalloway.

I might have misunderstood, but are you suggesting that I enter it with today's date and then edit it later to backdate? Probably that's not what you meant, as it would just override the original entry.

 

[neilsolaris]

Another thought just occurred to me. When I record an expense in QuickBooks, I select the bank account that the money is being paid from at the top, referred to as the "payment account" in QuickBooks.

When I look at the drop-down list, along with the bank accounts, I see the following options:

• Other creditors
• Uncategorised asset
• Stock asset
• Other debtors
• Bad debt provision
• Prepayments
• Undeposited funds
• And at the top of the list is "Add new."

Therefore, maybe I can record the backdated VAT payment to one of these accounts first. I'm not sure if any of them apply, but I could add a new account if needed.

Then, I can create a journal entry with today's date: Debit the account I used and Credit the bank account.

Would that work? If so, which account would be most suitable? I'm thinking of using "accruals" if I'm able to add it.

 

[Daybooks]

I may be misunderstanding the issue or it is being over complicated.

Post the VAT only invoice from the supplier (you’ll need this to support your reclaim) with the date per invoice or amend date to your latest VAT period depending upon how Quickbooks handles these situations.

Then pay the invoice in the normal way and claim the VAT back on the next return. No journals required.

Without the invoice how can you check they are VAT registered and from the earlier date as they state?

 

[neilsolaris]

I may be misunderstanding the issue or it is being over complicated.

Post the VAT only invoice from the supplier (you’ll need this to support your reclaim) with the date per invoice or amend date to your latest VAT period depending upon how Quickbooks handles these situations.

Then pay the invoice in the normal way and claim the VAT back on the next return. No journals required.

Without the invoice how can you check they are VAT registered and from the earlier date as they state?

Thanks for your suggestion. Which account are you recommending for posting the backdated VAT payment? In the past, I've always posted it to the bank account, as this has always represented the actual tax point.

The actual tax point for this invoice is from last year, so shouldn't we apply it to that period? Our current tax quarter ended at the end of last month, and I'm waiting to resolve this so it can be included in the April-June 2024 VAT return. If we include it in this quarter, we can't reclaim it until October, and I'm not sure that's the correct accounting method anyway.

 

[Daybooks]

Firstly you must have the VAT only invoice from the supplier. Post that invoice as you would do normally. If it is in a closed period then that is fine - just get the invoice onto the current open VAT period. Accounting for it in the retrospective period is wholly unnecessary. The invoice payment is a normal invoice payment. It is not a “cash book” payment as such. Thus there is no nominal code to worry about (albeit that it will go to the Creditor Control Account). Does that help?

 

[neilsolaris]

I may be misunderstanding the issue or it is being over complicated.

Post the VAT only invoice from the supplier (you’ll need this to support your reclaim) with the date per invoice or amend date to your latest VAT period depending upon how Quickbooks handles these situations.

Then pay the invoice in the normal way and claim the VAT back on the next return. No journals required.

Without the invoice how can you check they are VAT registered and from the earlier date as they state?

I can't edit my previous post now, so I'll type here. I meant to say, I can easily backdate the VAT-only expenses, posting to the bank account, and the bank account will balance. My only concern is that it won't match the bank statements very well, as there will be a transaction on the bank statement for today (or whenever I pay it), but on my record, it'll appear as last year. Isn't that a problem?

I already have the invoice from the supplier. He's given last year's date as the tax point, which I believe is correct.

 

[neilsolaris]

Firstly you must have the VAT only invoice from the supplier. Post that invoice as you would do normally. If it is in a closed period then that is fine - just get the invoice onto the current open VAT period. Accounting for it in the retrospective period is wholly unnecessary. The invoice payment is a normal invoice payment. It is not a “cash book” payment as such. Thus there is no nominal code to worry about (albeit that it will go to the Creditor Control Account). Does that help?

I do have the invoice from the supplier, with the tax point in 2023.

I think I understand what you're saying. Normally, I create an expense directly connected to the bank account. I haven't encountered a situation before where the actual tax point differs from the payment date. Typically, when I post an expense, it would be: Debit profit & loss / VAT control account, Credit bank account. What would the credit entry be for you if it is not a cash book payment?

Our previous VAT period ran from April to June, which I have yet to submit. If I include the invoice in the current period, I would have to wait until October to reclaim the VAT. It would be better to have it appear in the previous VAT period to help with cash flow.

 

[Daybooks]

Unless Quickbooks is making it overly complex for you then posting of the VAT only invoice has nothing to do with the bank account. The effect of posting the invoice will simply be (say) Dr VAT Control £100 Cr Creditor Control £100.
Once you have the outstanding invoice for (say) £100 the normal “purchase ledger” payment will Dr Creditors / Cr Bank.

Your VAT recovery will come about by the fact that the VAT only invoice is now on the system with (say) £100. Again depending on Quickbooks handles closed VAT periods the recovery of the VAT should take place on you earliest VAT Return.

For clarity do not post the payment of the invoice as anything other than a normal purchase ledger payment otherwise you’ll end up with an unpaid invoice and possibly an erroneous Input VAT entry. The prior year date, although technically correct is really irrelevant because it is this quarter VAT Return you will be claiming for. So whether you post with a date of 31 Dec 23 or 30 Jun 24 it cannot go onto a submitted VAT quarter.

Additional based on your latest posting:
You want the invoice to go into the Apr-Jun VAT quarter irrespective of what date is used (although not post June).

 

[neilsolaris]

Unless Quickbooks is making it overly complex for you then posting of the VAT only invoice has nothing to do with the bank account. The effect of posting the invoice will simply be (say) Dr VAT Control £100 Cr Creditor Control £100.
Once you have the outstanding invoice for (say) £100 the normal “purchase ledger” payment will Dr Creditors / Cr Bank.

Your VAT recovery will come about by the fact that the VAT only invoice is now on the system with (say) £100. Again depending on Quickbooks handles closed VAT periods the recovery of the VAT should take place on you earliest VAT Return.

For clarity do not post the payment of the invoice as anything other than a normal purchase ledger payment otherwise you’ll end up with an unpaid invoice and possibly an erroneous Input VAT entry. The prior year date, although technically correct is really irrelevant because it is this quarter VAT Return you will be claiming for. So whether you post with a date of 31 Dec 23 or 30 Jun 24 it cannot go onto a submitted VAT quarter.

That's great! This is exactly what I was asking about, and you've answered it perfectly. I wasn't sure if I was allowed to do a journal entry with the VAT Control account. But since you say I can, it should be very easy now.

Many thanks!

 

[Daybooks]

That's great! This is exactly what I was asking about, and you've answered it perfectly. I wasn't sure if I was allowed to do a journal entry with the VAT Control account. But since you say I can, it should be very easy now.

Many thanks!

You are welcome. I am tempted to reply RTQ to many posting but so far have avoided it.

 

[Daybooks]

That's great! This is exactly what I was asking about, and you've answered it perfectly. I wasn't sure if I was allowed to do a journal entry with the VAT Control account. But since you say I can, it should be very easy now.

Many thanks!

PS Yes you can do a Journal to the VAT Control account but I would avoid it like the plague. Please re-read my explanation. One purchase invoice, one purchase ledger payment. No journals.

 

[neilsolaris]

PS Yes you can do a Journal to the VAT Control account but I would avoid it like the plague. Please re-read my explanation. One purchase invoice, one purchase ledger payment. No journals.

The problem is, I don't know how to achieve what you described on QuickBooks without doing a journal entry. It might be QuickBooks makes it difficult or impossible, or it could be me not knowing the correct procedure.

 

[neilsolaris]

I think I've worked it out now. On QuickBooks, I just have to make what they call a "bill" to this supplier. I think that's it anyway. I'll let you know when I've done it so see if it is successful.

 

[neilsolaris]

Just reporting back as promised. The above worked fine. I was unsure as to whether the backdated VAT, that is now captured in the VAT exception report, would apply to the pending VAT quarter just finished, or the present VAT quarter we're on now. It turns out it has applied itself to the pending VAT quarter (April to June). This is what I was hoping for originally.

Thanks everyone for your help.

 

[Daybooks]

I think I've worked it out now. On QuickBooks, I just have to make what they call a "bill" to this supplier. I think that's it anyway. I'll let you know when I've done it so see if it is successful.

Yes, the “bill from this supplier” is the purchase ledger invoice. The payment of that invoice is the purchase ledger payment.

It sounds like you’ve been making cash book entries for everything instead of using the purchase ledger and sales ledger.

This implies you are using the cash basis which is not permissible for limited companies which have to be done on the accruals basis. Your income and expenditure will be, inter-alia, based upon the physical invoices raised and received regardless of any payment.

 

[numbersrule]

If this is a supplier who is able to claim back their Input VAT during a Pre-Registratikn period, then remember they would not be able to retrospectively charge Output VAT (your Clients Input VAT) during that Pre-Registration period.

Alternatively, if this is about charging VAT on Invoices raised after the Registration date whilst waiting for their Registration to be confirmed, (which has been going on since last year) then my understanding is that the VAT only Invoice should be dated in the present.

The HMRC rules about dates for Invoices are solely to ensure that VAT is paid to HMRC in a timely manner. If your situation is legitimate and I have no doubt that it is, then why would the VAT only Invoice need to be dated at any time other than in the present? That is when the VAT bill will be incurred and when the payment will be made.

 

[neilsolaris]

Yes, the “bill from this supplier” is the purchase ledger invoice. The payment of that invoice is the purchase ledger payment.

It sounds like you’ve been making cash book entries for everything instead of using the purchase ledger and sales ledger.

This implies you are using the cash basis which is not permissible for limited companies which have to be done on the accruals basis. Your income and expenditure will be, inter-alia, based upon the physical invoices raised and received regardless of any payment.

Well, with the invoices I wasn't using the cash basis, but I have recorded most suppliers using cash basis, as the cash basis matched the tax point. But I'll enter them as bills moving forward.

I always make year end adjustments though so that the payments and receipts are in the correct period.

If this is a supplier who is able to claim back their Input VAT during a Pre-Registratikn period, then remember they would not be able to retrospectively charge Output VAT (your Clients Input VAT) during that Pre-Registration period.

Alternatively, if this is about charging VAT on Invoices raised after the Registration date whilst waiting for their Registration to be confirmed, (which has been going on since last year) then my understanding is that the VAT only Invoice should be dated in the present.

The HMRC rules about dates for Invoices are solely to ensure that VAT is paid to HMRC in a timely manner. If your situation is legitimate and I have no doubt that it is, then why would the VAT only Invoice need to be dated at any time other than in the present? That is when the VAT bill will be incurred and when the payment will be made.

I get your point. This situation presumably arose because the supplier was careless and didn't realize he'd exceeded the VAT threshold, and so he was forced to be VAT registered retrospectively from early last year. He didn't go into much detail, but this is obviously what happened.

From our point of view, I just wanted the input VAT to go into the unsubmitted VAT return for the quarter just finished, rather than the present quarter. I believe I accounted for it correctly. I was just struggling with how to achieve it with QuickBooks. It turned out to be really straightforward, and at least I know how to do it for next time.

 

[Bobbo]

Well, with the invoices I wasn't using the cash basis, but I have recorded most suppliers using cash basis, as the cash basis matched the tax point. But I'll enter them as bills moving forward.

Really? Every single supplier was paid on the same date as the date of their invoice?

 

[neilsolaris]

Really? Every single supplier was paid on the same date as the date of their invoice?

True, I didn't mean that. With the self billing suppliers which account for about 98% of them, yes, they are paid and receive their invoices at the same time, and always within 14 days of the job. But there are a handful where the supplier's invoice date is 3 or 4 days before the payment date. We pay very quickly. However, I'll match these supplier invoices correctly moving forward.

 

[Daybooks]

Really? Every single supplier was paid on the same date as the date of their invoice?

I have some clients who like to think that is true.

 

[neilsolaris]

I have some clients who like to think that is true.

To give you an idea of our efficiency, 21 suppliers finish working today at 6pm. The director will phone me at 6pm to confirm that there has been no overtime. They will then all have been paid and received their self-billing invoices by 6.15pm!