I would be really grateful if someone could help me out with a VAT query that I have. I have finally managed to get hold of my clients missing paperwork for his 07/08 accounts and have found that he was charging the wrong VAT percentage on his invoices. If I am correct the VAT rate was reduced at the beginning of Dec 08 to 15% (from 17.5%), he was charging 17.5% on his invoices during Dec 08, Jan, Feb and Mar 09. To complicate and panic me even further he is on the flat rate scheme for VAT. Not sure of the best way to approach this in Solar accounts and would really appreciate some help please !
Hi Angela,
Yes you are correct - the standard VAT rate in the UK was changed from 17.5% to 15% on 1 December 2008. Then it was changed back to 17.5% on 1 January 2010, then it was changed to 20% on 4 January 2011. A further complication is that the 'flat rate' percentage that should be applied to your client's transactions changed at each of these dates too.
I recommend you do the following:
1. Enter the transactions with the correct VAT rates into Solar Accounts. (See note below)
2. Print the 'VAT Return Detail' reports for previous VAT periods to determine the correct figures that should have been submitted on previous VAT returns.
3. Compare the actual figures on the submitted VAT returns with the figures calculated by Solar Accounts, and compute the difference.
4. Notify HMRC of the error, then manually adjust the figures on your next VAT return to correct the error you calculated in the previous step.
Note: When entering or editing the transactions it is easy to apply the correct VAT rate - the VAT column should be 17.5%, 15% or 20% as required. However, applying the correct 'flat rate percentage' to each transaction is a little more tricky: you will need to click the small 'Up' arrow next to the VAT Treatment field on the invoice, then enter the appropriate flat rate percentage. A further complication is that if your client uses the 'cash method' for calculating your VAT figures, you should enter the flat rate that applied when the invoice was paid, not when it was issued. For example, if the invoice was created in November 2008 and paid in December 2008, the flat rate you specify on the invoice should be the rate applicable in December 2008.
Regards,
