processing invoices and bills

Maf. King maf at chilwell.net
Wed Mar 14 10:29:58 EDT 2012


On Wed 14 March 12 14:09:27 Ed Delves wrote:
> Hi Maf,
> 
> I think I have got to the bottom of this thanks to your help. See below:

No worries. but it looks like a can of worms is now open. :-(

<SNIP>
> 
> This appears to be crucial - the VAT is split as you say at the time of
> posting but won't obviously show on a transaction report until the bill has
> been paid (or should it?) The problem I have is that, by agreement with our
> vendor, bills are not paid for at least 6 months so when a VAT return is
> done and the transaction report generated, it does not show up. I have now
> gone back to a known VAT quarter where I have a pdf copy of the transaction
> report for the period and have redone the transaction report again now that
> the bill has been paid. The correct VAT amount now shows up.
> 
> Problem solved but unfortunately it means that my VAT returns dating back to
> 2009 are all wrong to a 5 figure amount. Would it not be better if the VAT
> amount appeared on the current transaction report when the bill was paid
> rather than retrospectively appearing on a report for a period that has
> long passed? It looks like I now have a major headache to deal with with
> HMRC!

Well, it depends.  now, I'm not an accountant, nor a lawyer, so don't take 
this as anything other than "a bloke down the pub said..."  (but I have 
accounted for vat across for a number of entities over about 20 years...)

Generally, UK VAT is done on an accruals basis, not cash.  This means that the 
tax becomes due when you do the paperwork, or make the suppy. (the Tax Date on 
an invoice)  Not when funds actually transfer.  Under this approach, yes, if 
you write an invoice on 14th March (as I just have) and the VAT quarter ends 
on 31/3 (it will for me), then the tax from the 14th March is treated in that 
quarter.  no matter when you actually get the money from the customer 
(sept/october in your case?)  -  I must include the invoice totals in the 
relevant boxes 1 and 6 on the vat return and payment due around early april. 

 AFAIK, the business features and reports in GC handle this useage case very 
well, and reports correctly show posting date as expected
.

HMRC do offer various schemes to simplify VAT, which use Cash basis 
accounting.  This means that the VAT totals are calculated using "cleared 
funds" dates.  It sounds like you have been doing this, but you have to have 
specific agreement with HMRC to do it.  The schemes are usually aimed at very 
small businesses and start ups, I suspect that if you are wrong by 5 figures 
on a return you probably don't qualify.

Best bet is to talk to an accountant, with your submitted returns and GC 
reports figures to hand, then probably phone the HMRC and hope you get them on 
a good day! 

Good luck,
Maf.

> 
> Any further comments welcome and thanks for your help.
> 
> Ed





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