Sage VAT Manual Adjustment Account

angmc

Our accountant entered a debit adjustment in the VAT liability account at the beginning of the year
(2012/13) for VAT to be reclaimed. I've reclaimed what I could (not all of it as we didn't have a VAT invoice/receipt) using the manual adjustment option on the VAT return. The problem is I've now got a credit balance sitting in the manual adjustment account. Do I clear this out by Dr the adjustment account (2204) & Cr the liability account (2202)? If I did this it would just leave the difference between the accountant's adjustment at the beginning of the year and the amount I was able to claim back, which would be correct, right?! I take it the accountant would then clear this amount out when they do the year end?

reader

angmc wrote: »

using the manual adjustment option on the VAT return. The problem is I've now got a credit balance sitting in the manual adjustment account.

I wouldn't have used the manual adjustment option to be honest.

Let's say you are doing the VAT return for QE 30 April 2013 and the liability in the liability account is £1,000 CR and the accountant entered a DR adj of £200 this will give you a balance of £800 CR in your liability account (£1,000 - £200). Then on the VAT return that you submit to HMRC all I would have done is increase the box 4 figure by £200 and this would make the box 5 figure £800 as well. Then in June when the £800 of VAT is paid (as per the box 5 figure submitted to HMRC) this will settle/"zero off" the liability account to the exact penny.

It looks like the accountant is going to have to reverse your manual adjustment posting in order to get rid of it.

angmc

Thanks Reader but as far as I know the only way to adjust the VAT return figures in Sage is by using the manual adjustment option which then posts the adjustments, in this case, as a debit to the VAT liability account and a credit to the manual adjustment account. I was thinking I could just do a journal to debit the adjustment account (leaving it with a nil balance) and a credit to the VAT liability account which would leave a balance on there of the amount of VAT I was unable to reclaim from the accountants original adjustment and then advise the accountant accordingly when they do the year end accounts.

Gem7321

Do you submit your VAT return from Sage? Or do you type it in to HMRC website?

If you type it in to the HMRC website Reader's suggestion will work fine, but if you submit from Sage then as you know the adjustment needs to be posted as a T1 to appear on the VAT return. What does it actually relate to? If it's been adjusted by opening balance adjustment, which is what it sounds like, the accountant should have given you the information you needed to be able to adjust the VAT correctly.

angmc

Hmm I think this is getting more complicated than it needs to be, probably me confusing things! The accountant's adjustment relates to some Vat not claimed on rent paid. I submit the returns via Sage and all the figures are correct. Really I just want to know what to do with the balance in the adjustment account...I don't like it sitting there and if I move it to the liability account the outstanding balance on there will be correct (the amount I couldn't reclaim from the accountant's adjustment).

coojee

angmc wrote: »

Hmm I think this is getting more complicated than it needs to be, probably me confusing things! The accountant's adjustment relates to some Vat not claimed on rent paid. I submit the returns via Sage and all the figures are correct. Really I just want to know what to do with the balance in the adjustment account...I don't like it sitting there and if I move it to the liability account the outstanding balance on there will be correct (the amount I couldn't reclaim from the accountant's adjustment).

Is it a year end adjustment? Ie last years rent figure was overstated by the amount of the VAT not claimed? If so the accountants journal will have been DR VAT and CR Retained profit. Really the DR to VAT should be put through the input vat account as a nil invoice so that it appears on the VAT return. I'm just thinking things through here as I'm typing. If the accounts for last year hadn't been closed down when the adjustment was made then the accountant could have just amended the invoice which would have left the VAT as an unreconciled amount to be brought into your next VAT return. Without seeing the transactions I'm not sure how to correct it. It's got to appear in your VAT return somehow I know that much.

angmc

Well it was actually entered as an opening balance adjustment dated 1/4/12 (our year end is 31/3). So to give you some approximate figures say for example the accountants opening balance adjustment was £500 so at the beginning of the year the vat liability account was showing a debit balance of £500. I was only able to claim back say £200 so after doing my adjustment of £200 input tax on the vat return (on sage), doing the transfer process and entering the bank payment I've now still got a debit balance of £500 on the vat liability account but a credit balance of £200 on the manual adjustment account, now to my mind that £200 should really be in the vat liability account so that it would be showing a debit balance of the £300 that I couldn't claim back? Am I missing something?

angmc

Believe it or not I've actually got my Indirect Tax exam tomorrow! Hope nothing like this comes up!!

Rozzi Rainbow

angmc wrote: »

Our accountant entered a debit adjustment in the VAT liability account at the beginning of the year
(2012/13) for VAT to be reclaimed. I've reclaimed what I could (not all of it as we didn't have a VAT invoice/receipt) using the manual adjustment option on the VAT return. The problem is I've now got a credit balance sitting in the manual adjustment account. Do I clear this out by Dr the adjustment account (2204) & Cr the liability account (2202)? If I did this it would just leave the difference between the accountant's adjustment at the beginning of the year and the amount I was able to claim back, which would be correct, right?! I take it the accountant would then clear this amount out when they do the year end?

That sounds sensible to me. Sage would be unable to pick up the additional VAT reclaimable your accountant posted to the VAT liability account (as debits there would normally be VAT paid to HMRC) without you doing the manual adjustment. Sage then posts your manual adjustment to the adjustment account, for you to manually move it to where it's meant to be - i.e. contra'ing your accountant's entry in the liability account.

I would speak to your account about the extra VAT you haven't yet reclaimed, because if they have entered it all as VAT reclaimable, they must think you can reclaim it even if you don't have the invoices or receipts. Do you think you would easily be able to get hold of copy invoices? If so I would be inclined to reclaim all the VAT now, in the knowledge that by the time it got investigated (if it ever came to that!) your copy invoices would have arrived.

angmc

Rozzi Rainbow wrote: »

I would speak to your account about the extra VAT you haven't yet reclaimed, because if they have entered it all as VAT reclaimable, they must think you can reclaim it even if you don't have the invoices or receipts. Do you think you would easily be able to get hold of copy invoices? If so I would be inclined to reclaim all the VAT now, in the knowledge that by the time it got investigated (if it ever came to that!) your copy invoices would have arrived.

The amount not reclaimed relates to premises rent. The rental company would send out non tax invoices for the period, which would get entered into sage with a T0 code, when the rent had been paid they would then send a vat invoice/receipt and the original entry in sage would be adjusted to account for the vat. We are in dispute with the rental company (actually they have gone into liquidation) and one of the bills was never paid so no tax invoice received. I think the accountant just assumed that we had tax invoices and the vat hadn't been reclaimed in error, but I will speak to them about it.