VAT effect of cancelled sales invoices

sjkr
sjkr MAAT, AAT Licensed Accountant Posts: 74 ? ? ?
Hello,

I have just done the VAT return for a client, and reclaimed VAT on some sales invoices from a previous period which are now cancelled. I did a manual adjustment on the VAT return to reclaim the VAT, but I am not sure where I should be journaling the amount to in order to clear the Manual Adjustments.

Can anyone help? :confused1:

Comments

  • MarieNoelle
    MarieNoelle Moderator, MAAT, AAT Licensed Accountant Posts: 1,369
    hi,
    which software are you using? I would have raised credit notes for the cancelled invoices and most softwares would adjust for the next VAt period.
  • sjkr
    sjkr MAAT, AAT Licensed Accountant Posts: 74 ? ? ?
    I have switched my client from MYOB on Apple Mac to Sage on Windows. The invoices in question were raised during the period on MYOB, but have now been cancelled. So they were never on Sage - I didn't include them in the opening balance knowing that they were not going to be received. Hence not raising credit notes, there was nothing to raise them against. So I now have the reclaimed amount of VAT still in the Manual Adjustments - I know I need to move them somewhere, but have got a bit confused!!!
  • coojee
    coojee Registered Posts: 794
    If they were never issued then the VAT should never have been paid. If they were issued then you have to do credit notes so that the person they were sent to can amend their system as well. If they weren't issued but the VAT was paid anyway then you're in a pickle. How did you get the opening TB to balance without including these invoices? If they were cancelled before the transfer then the VAT would have been adjusted at the same time so the opening VAT balance should already reflect this.
  • sjkr
    sjkr MAAT, AAT Licensed Accountant Posts: 74 ? ? ?
    Hmm, thanks for the help, think I'm in a pickle! :001_unsure:

    The records were not kept particularly well in the past (they didn't have a book-keeper and relied on the accountant to sort things out at year end). I have opened Sage up for them using actual balances from bank and supplier statements where possible, rather than using the balances on the old system - I know some of them don't match, but I needed to get the VAT return done and they still haven't reconciled the old system or sent the paperwork for last year to the accountant.

    With the benefit of hindsight, I should have included the cancelled invoices in the opening balance and raised credit notes, it would have been easier! But I didn't, the VAT return has been submitted and further transactions put on, so I'm not really wanting to restore from the backup and do it again.

    Does anyone know a way round this?????

    J.
  • coojee
    coojee Registered Posts: 794
    sjkr wrote: »
    Hmm, thanks for the help, think I'm in a pickle! :001_unsure:

    The records were not kept particularly well in the past (they didn't have a book-keeper and relied on the accountant to sort things out at year end). I have opened Sage up for them using actual balances from bank and supplier statements where possible, rather than using the balances on the old system - I know some of them don't match, but I needed to get the VAT return done and they still haven't reconciled the old system or sent the paperwork for last year to the accountant.

    With the benefit of hindsight, I should have included the cancelled invoices in the opening balance and raised credit notes, it would have been easier! But I didn't, the VAT return has been submitted and further transactions put on, so I'm not really wanting to restore from the backup and do it again.

    Does anyone know a way round this?????

    J.

    Sounds like you might have to post it to suspense then until you can get the opening balances sorted. Did you double check that the VAT was actually paid on these invoices before you reclaimed it? Sorry if it sounds like I'm stating the obvious but it's never a good idea to take a client at their word, just because they say the VAT has been paid doesn't mean it has been paid. When you set Sage up did you have a balanced TB to enter?
Privacy Policy