Hi, can you please advise on the following scenario:

I put a purchase invoice on a few months ago and sebsequently agreed with the supplier to cancel the service and disregard the invoice. No payment in settlement for it was required and the amount had a VAT element.

However, the invoice was left on Solar and subsequently, VAT has been claimed on the invoice because we operate on the basis that VAT is calculated 'when invoices are issued'. But VAT has obviously not and will not be paid.

I was wondering what is the best way to address this anomaly as the VAT amount must technically be paid back in the next return.

Hello Ellie,

Create a new credit note using today's date as described here:
http://www.solaraccounts.co.uk/help/how-to-record-a-purchase-credit-note.php

Then allocate it to the existing purchase invoice as described here:
http://www.solaraccounts.co.uk/help/how-to-allocate-a-purchase-credit-note.php

The credit note will then reduce your Box 4 figure on your next VAT return.

Regards,

Hi,

Also remember that you may need to declare the inaccuracy to the VAT office.
There is a VAT reporting form on the HRMC website.
The rules were changed about errors under £1000 as far as I am aware.

Regards
Joe.