VAT sales with no records!

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in General accounting discussion
My client has a "corner shop" she does not have till receipts or any record of sales(despite constant reminders and tellings off!!). All I have is bank statements showing amounts paid in and any cash paid out is from takings. There is no itemisation of T0 and T1 sales.
Last quarter I went to her accountant and he worked out a VAT figure for the sales based on the purchases(I itemise them into T0 and T1). however, he was in such a rush he did not show me the formula and he has gone on holiday and I only have a few days to get the return in!
Does anyone know this "formula"! or how best to deal with this situation? :?

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:VAT sales with no records!

    One could assume he used the mark-up or margin method. So he has taken purchases and used either mark-up/margin to work out the sales figure and applied the VAT.

    The mark-up method:

    Purchases = 100%
    Markup, say 30%
    Sales = 130%

    Margin method:

    Sales 100%
    purchases 70%
    Margin 30%

    Once you have established the sales figure you can then apply the VAT. He may have used another formula which you will need to clarify but the mark-up/margin method is the most obvious.

    Regards
    Steve
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:VAT sales with no records!

    Thanks Steve. However, He already had used the sales figure, so it was a matter of working out what % of that was standard rate and what % was zero rated. This was based on the purchases, which had already been seperated into standard and zero rated. Would this be a different scenario?
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:VAT sales with no records!

    Then I would have thought to work that out he has totalled the purchases for the period and worked out a %age of sales to purchases. You have worked out the % of T0 and T1 and he has applied the same %ages to the sales figure.

    So if 40% of the purchases are T0 and 60% T1 then he could have applied the same %ages to the sales figure, perhaps.

    You have two choices here to complete the return. If your client has not been late in the last 12 months with their VAT return you can delay submission until the accountant returns on holiday. HMRC will issue a default notice but this just says that if any of the returns are late within the next 12 months, a default surcharge will be applied.

    Failing that you could apply the same %age principles as above, submit the return and then clarify the accountants treatment on his return from holiday - any errors can be corrected on the next return providing they don't exceed £2,000.

    Regards
    Steve
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:VAT sales with no records!

    Steve

    Not sure about this but would this come under partial exemption VAT rules and that is the formula that edkav means?

    I agree with steve that the best advice is to accept the default period and get it right rather than guess and make a mistake

    Annette
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:VAT sales with no records!

    Yes Annette - that's an excellent point which I missed.

    The partial exemption rules state that input tax must be apportioned between that relating to taxable supplies and that relating to exempt supplies. The method to attributing input tax is to:

    1. Calculate how much of the input tax relates to supplies which are wholly used or to be used in making taxable supplies (this input tax is deductible in full).

    2. Calculate how much of the input tax relates to supplies which are wholly used or to be used in making exempt supplies (this is exempt input tax).

    3. Calculate how much of any remaining input tax is deductible using the percentage of taxable turnover ex vat divided by total turnover ex vat multiplied by 100% (rounded up to the nearest whole %age).

    Best regards and thanks to Annette for pointing this out.

    Steve
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:VAT sales with no records!

    Thank you so much for your advice Steve and Annette,greatly appreciated.

    Edwina
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:VAT sales with no records!

    No problem - good luck with your VAT return!

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