Problem handling VAT Flat Rate Scheme | AccountingWEB

Problem handling VAT Flat Rate Scheme

I thought I would draw the groups attention to an Any Answers post from AccountingWEB member BryanS1958 complaining about Incorrect VAT returns in KashFlow.

He explains: "The problem arises where sales invoices issued before 4/1/11 are paid after 3/1/11.  In this case Kashflow incorrectly calculates the VAT on a cash accounting basis using the new FRS rate, not the FRS rate at the time the sales invoice was raised.

"I advised Kashflow some time ago that this was an issue, but it has yet to be fixed (so much for quick fixes on cloud accounting software!), so I would suggest that accountants check their clients' VAT returns filed for periods ending on or after 31/1/11 to ensure they are correct...

"It is also difficult for users to identify the error because the Kashflow VAT detail report does not show how it has arrived at the calculation for Box 1 or box 6.  The user has to know how to calculate the figures for these entries."

Has anyone else noticed this or picked up feedback on the issue from KashFlow? I'm sure Bryan would appreciate advice if anyone knows how to amend the returns prior to efiling, and mentioning it here should also escalate the issue with KashFlow - or are you less bothered about it now that we've entered a new VAT quarter?

alexredmond's picture

You can't change VAT returns

alexredmond | | Permalink

I came across this problem at the time. Kashflow confirmed that there is no way to amend returns so I ended up filing manually.

You then have to create a VAT journal in Kashflow and block transactions before the VAT return date (in advanced settings). It's a bit cumbersome but it gets around the issue.

The downside is that the VAT report history has a gap in it.

thacca's picture

Work out manually

thacca | | Permalink

Work out the correct figures and correct with a journal. Although its not the perfect solution I'm not aware of any other software that handles it better.

VAT journal

BryanS1958 | | Permalink

I don't think a journal is really an option (although I haven't spent any time trying) because the VAT 100 VAT payable is still likely to be incorrect, even though the VAT FRS adjustment may be correct.

I also noticed that if the client enters input VAT on transactions this goes to Input VAT on the Balance Sheet, even though under FRS the input VAT should be expensed in the P & L.

As you say, Kashflow is one of the few packages that has a go, albeit not particularly well, at FRS, although I believe Sage now does it.  But Kashflow really needs to get a VAT adjustment option done as a matter of priority so at least VAT returns can be 'fixed' and filed online, rather than being unable to file at all via Kashflow and having to do manual online filing via HMRC's website.

thacca's picture

VAT Journal

thacca | | Permalink

I haven't got time to check now but I'm sure a journal to the output VAT accounts picks up on the VAT Return. So I would expect a manual adjustment should sort the problem.

thacca's picture

VAT Journal

thacca | | Permalink

Having said I didn't have the time I went straight off and checked. Yes a journal to the output VAT account gets picked up by the VAT Return.

Input VAT - if using the FRS input VAT shouldnt be recorded by the inputer - Invoice should be recorded gross at data input stage.

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