Home For everyone Chat and off-topic discussion
Current updates regarding coronavirus (Covid-19) and the precautions AAT are taking will be continually updated on the below page.

Please check this link for the latest updates:
We hope you are all safe and well and if you need us we will be here. 💚

VAT Return calculations

sarahwilsonsarahwilson Experienced MentorRegistered Posts: 567
Someone I know thats self employed has told me that they work out their VAT return by taking the whole amount of invoices they have raised in the month and only subtracting the purchase invoices they have actually paid in the month. So in effect they are paying over the amount of VAT they owe HMRC but only telling them about the VAT HMRC owe them thats been paid, so they are always behind. They pay everyone (where possible) to 35-45 days so it all comes out in the wash but its still not being done right is it?

My question is is how would you straighten this outand will HMRC question it? Hes been trading 14 years and says hes always done it like that and his books go to an accountant at the end of the year who has never quibbled it. Am I being over worried due to my student status and this is OK or am I right and its not right at all?


  • columbiacolumbia Experienced Mentor Registered Posts: 580

    If he is on the cash VAT scheme and not the standard VAT scheme, then he would only pay vat based on the items he has paid for and for the items his customers have paid him for.

    If you look on the HMRC website you can read all about the scheme, sorry but I am not clever enough to be able to post a link here!

  • sarahwilsonsarahwilson Experienced Mentor Registered Posts: 567
    He may be on cash accounting but even so hes not doing it right!! Hes taking all his sales for a month regardless of whether they've been paid or not and deducting his paid for purchases in the month. He is actually doing himself out of money because hes not claiming enough VAT back but I'm still not sure HMRC would be impressed.
  • columbiacolumbia Experienced Mentor Registered Posts: 580
    Hi Sarah

    Sorry, should have read it a bit more carefully! It would be best to get him on track from the next return and make sure he includes all relevant information so that from this point onwards his returns are correct. As for the previous returns, I'm not sure how far back the revenue can check, I know from recent experience that they went back 4 years with ours. I suppose the fact that he is doing himself out of money is at least in his favour, but the best thing for him to do would be to show that he is making an effort to correct his past mistakes and be accurate in the future.

    Also, if his accountants have been checking his books perhaps they have been making the relevant adjustments without him realising, might be worth checking what he thought he owed at the year end, and what the accountants showed on the year end accounts.

    All the best

  • sarahwilsonsarahwilson Experienced Mentor Registered Posts: 567
    Its all manual books (nightmare!!) so I was going to suggest having a book for the purchase invoices as he does for the sales invoices, writing all November thats not been paid and December invoices in to bring it straight this time and then just do it as it should be from hereon in.
  • BluewednesdayBluewednesday Font Of All Knowledge Registered Posts: 1,624
    If he's got a cash book why doesn't he claim the VAT via that (although it will need checks to make sure he doesn't pay over any sales VAT twice) but claiming via the cash book will put him on the right track
  • sarahwilsonsarahwilson Experienced Mentor Registered Posts: 567
    Yes he could do that, he needs to do it one way or the other as at the moment he seems to be doing a mixture of both.
  • mark130273mark130273 Font Of All Knowledge Registered Posts: 4,234
    yes..thats seems right to me too
Sign In or Register to comment.