I run a small clothes shop and realise after a recent VAT audit that I have been recording the VAT incorrectly. We get an invoice from a supplier for mixed clothes adults & children. I book the whole invoice in at standard VAT rate. The childrens portion should have been zero rated.
How can I now go back and adjust the VAT to the correct amount, without making two entries per invoice, 1 inc VAT and 1 exc VAT.
Hi Tony,
For future purchases, you will have to create two lines on the purchase invoice: one at the standard rate, one at zero rate.
For existing purchases, do not edit these transactions. Instead, do the following:
1. Go through each purchase and work out how much money you are due to pay back to HMRC - let's say the sum of these amounts is £300.
2. Record a General Transaction for £300 from the VAT Liability account to the expense account that you normally allocate childrens clothes to.
3. On your next VAT return, manually subtract £300 from the Box 4 figure calculated by Solar Accounts. This adjustment will increase the Box 5 figure and the amount you pay to HMRC by £300.
I hope this makes sense. Let me know if you need more information.
Regards,
