VAT Control/VAT Cash Control/VAT Payable

Hi Andy

Presuming you've been doing the books correctly you shouldn't need to 'reset' any balances. The only thing you might want to do is re-run (but not file) your VAT returns in CB to make sure they match up to what you actually submitted.

To better explain the accounts:

• VAT cash control - this is where the VAT element of an invoice/bill gets sent to upon creation.

• VAT control - once said invoice/bill gets paid it moves from the cash control to here.

• VAT payable - you generate the VAT return and the VAT due moves from the VAT control to here (if that's the way you've got it setup in Settings > Toggle Features > Accounting > VAT return journal)

• When you pay the VAT bill you would post the subsequent bank transaction to VAT payable.

A few rules that will help you:

1. The cash control should only ever contain the VAT element of your outstanding sales less the VAT element of your outstanding purchases.

2. The VAT control should effectively be zero at the end of each quarter once you run the VAT return as the amount payable on the return should hopefully equal the amount in the control account.

3. VAT payable will generally be zero apart from that short period between generating the VAT return and actually paying the bill.

Thank you very much for your help, Kevin. I think I now understand what the three categories are for. I'm sorry to trouble you further but if you can help …

I do think I have to re-set my opening balances on some of them as my dashboard shows a large amount of 'VAT owed to HMRC building up' which is not the case, my VAT returns are up to date. Prior to 1st July this year (which begins my financial year) I was running CB in tandem with paper books and calculating VAT from the paper books, not from CB. From 1st July I successfully - and accurately - morphed my VAT calculations from paper to CB and my Returns since then have been correct - but thanks to you I've checked my VAT Return Journal option and it hasn't been checked. So my opening balances at 1st July for the three VAT categories are incorrect, resulting in the dashboard 'VAT owed' figure. But the quarterly VAT calculations since then ARE correct - so maybe I could just ignore the three categories?? I'd rather not ignore them, I'd rather tidy things up.

Hi Andy

Pleasure.

Nope, you can't ignore them, we need to pick away to find the errors and put them right.

So your y/e is 30th June and you started using CB the following day (2015 I presume?) If so, it shouldn't be too tricky. What quarters do your VAT return run?

Hi again Kevin.

Yes my y/e is 30th June so my VAT quarters commence 1st July, Oct, Jan, Apr.

The complication is that I was using CB for everything but VAT Return calculations prior to 1st July this year. I started those from 1st July and, like I say, I didn't have my VAT Return Journal Option ticked (and still don't as yet) which must have caused the problem. My VAT Return calculations since 1st July are spot-on (I double-checked everything at time of crossover from paper to CB) - it's just the VAT Control, cash Control and Payable which are incorrect.

Ok, that's handy then I guess (not everyone's year-end dates and VAT quarters are aligned like yours).

Essentially, on 30th June 2015 you should have the following balances:

VAT cash control (the VAT you've got owed in on your sales less VAT owed out on purchases - you can calculate this figure quite easily i'm sure as the debtors/creditors will be in the accounts?)

VAT control - this should be at zero

VAT payable - do you want the net VAT due each month to be posted to this special balance sheet account or do you like the way it currently works by creating a bill payable to HMRC VAT?

Thanks again Kevin, I shall do as you say and hope it all works out, I'm sure it will.

I'm unsure what the advantage would be to post the VAT dues each month to a special balance sheet - at the moment I just let CB calculate the quarterly return info and then I go to the HMRC website and complete the actual Return from there. I copy that Return to our Accounts lady who organises payment on the due date.

If there's a better way of doing it I'm happy to change things.

Again I'm really grateful to you for your help - I contacted CB directly for help some time ago but they weren't very forthcoming, and later didn't even respond to my further requests. You've made things very clear.

Thanks ever so much for your trouble Kevin, you've been extremely helpful.

I think I understand all you've said so I'll set to it.

Regards

Andy

See how you get on. Any problems just stick another post up here or do feel free to contact me direct on info@platformaccounting.com / 02476 980440.

Me again, sorry.

I've calculated what my VAT Cash Control opening balance should be at 30th June '15, but CB won't allow me to change the figures which presently stand at zero. Do you know how I can change the opening balance to what it should have been - is this where I have to create a journal or suchlike to rectify it?

Hi Andy

Apologies, i've been out of the office for a couple of days.

Yes, you will need to create a journal by heading to Tools > Journal > Create

I'll be honest though, without knowing a bit more about your opening balances and how the transactions were previously treated it's difficult to know exactly how that journal should look i'm afraid. Also, if you've already filed your June 15 accounts you probably won't want to date the journal in June 15.

Are you using an accountant or trying to muddle through it yourself? If you have got somebody i'd suggest asking them to take a quick look so as not to get it wrong.

Hi Kevin. Crikey, don't apologise - I'm surprised you find the time to respond at all, but I'm very grateful for your guidance. I do have an accountant who checks our books when they write up our annual accounts but we handle the day to day book-keeping. But I will now ask them to take a look at the situation. To be honest, it's only our dashboard 'VAT owed' figure which is frustratingly incorrect, I guess I could just ignore it as this doesn't affect my quarterly VAT Return calculations. I'll chuck the problem to them and see what they say. Thanks again for your input - hope business is good for you.

It's not quite as simple as the dashboard being incorrect though, those figures are pulled from the balance sheet so in turn that will be wrong and depending on whether the accounts have been submitted yet though could potentially be slightly wrong too.

Your accountant will know exactly how to handle it all though so they're your best bet. It's important for Clear Books to match the reality as of 1st July so everything from there on in is handled correctly.

Hi - for a few clients it seems the Vat control account is not clearing down to zero after running the Vat return and checking the excluded items report for the same period. Even though the control account was zero the previous quarter end it seems a Dr/Cr residual balance seems to be left in the Vat control account yet nothing with any Vat on it shows in the excluded items report. Any ideas what may be causing this? There's no cash vat control ac involved with the affected clients.

How many entires are there? Sounds like you'll have to tick the VAT return off against the control a/c movements (or look for any obvious errors of course).

Thanks Kevin - I'll look forward to that task - some invoices have 30 line items :-) Would it not be safe to assume a difference can only arise in a quarter if there is an item on the excluded items list for the quarter, with Vat in it? All other items, whether Vat is included or not should be on the Vat return.

Apologies for the late reply on this one Roger, I must have missed it.

If truth be told, I find clients with incorrect VAT control balances most quarters, it's a complete pain. I'm just doing one now where it was zero at the end of June then £8629 at the end of Sep yet the Sep VAT return is coming out at £8748 so there's a £119 difference somewhere along the lines - some kind of incorrect journal behind the scenes would be my guess.

Totally agree. With some clients, the control account zero's out perfectly and you think that's great - others carry an unexplained Dr or Cr balance. I'm never 100% sure with supplies of services from outside the EU - OK its services from entity outside EU and 0% Vat but what happens with the Flat Rate scheme and then when you need to issue a credit note? There are automated journals going on in the background and I'm not sure they automatically reverse when a credit note is entered. Then there is the issue with bad debts written off and the lag of 6 months before the Vat bad debt relief can be claimed. Don't get me going on the Vat cash control ac - that is virtually impossible to reconcile as there is no Vat column on the unpaid sales or unpaid purchase invoice reports. This could be a reasonably simple fix to help folks reconcile their books!!!

I've just created a new nominal under bad debt called VAT control errors. If they're minimal i'm just going to write them off and keep an explanation, i'm not putting myself through it each Q and I sure as hell wouldn't expect the client to have a go.

That's a great solution :-)

You know what Roger, it's the wrong solution really and i'm quite sure HMRC would take offence but the reality is it's simply impossible to sit there for hours and hours on end picking through the rights and wrongs of automated VAT journals to rectify small mistakes. I've got a list in front of me now that needs sorting, they'll all be getting the same treatment unless it's large and/or obvious.

Agreed.