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Adjusting for VAT in accounts or tax comp

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A new personal tax client has asked me to close a company for them. 

Accounts have been filed but the sales were booked gross and no VAT returns or corporation tax returns were filed.

So the VAT returns need to be filed and VAT paid but I also need to take the VAT out the P&L to reduce the corporation tax.

Would you file amended accounts or can you deduct the VAT in the tax comp?

If you amend the accounts then do they have to go to Companies House or can you just attach to CT600?

I just want the simplest option for the client. They did have an accountant. 

Replies (23)

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By RaxJ
30th Sep 2020 07:13

The accounts need to be amended for companies house and HMRC. The VAT returns need to be completed correctly and sent to HMRC. I would go back to the client and give a quote for all this work before closing the company.

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By Matrix
30th Sep 2020 07:19

Thanks. Yes it will be a lot of work but my fees will be covered by the reduction in corporation tax. What a pain to have to file amended accounts when the company is being closed.

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By RaxJ
30th Sep 2020 07:27

Yes, it is a pain having to amend, but I would assume the VAT liability is missing from the balance sheet because you mentioned no VAT returns were completed. For accuracy and completeness, I would amend. How has the VAT been incorporated into the P&L? I would do a check of the previous accountant's work for any other errors.

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By Paul Crowley
30th Sep 2020 08:19

We do come across odd VAT stuff
I have seen VAT shown as as a P & L expense
I have also seen VAT payments added to Materials
I have seen All input VAT deducted from materials

Hence I would just try to get the Tax bits right

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By Paul Crowley
30th Sep 2020 07:17

I would just get the tax right and give client the option of CH revised accounts.

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By Matrix
30th Sep 2020 07:20

Thanks Paul. When you say get the tax right do you mean adjusting in the tax comp or attaching different accounts than those already filed at Companies House?

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By Paul Crowley
30th Sep 2020 08:20

I would change the accounts as accounts go in with return.

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blue sheep
By NH
30th Sep 2020 07:43

I would rework the accounts, attach those to a CT600 and give the client the option of filing with CH - frankly if the company is being closed no one will care a jot about the accounts at Companies House.

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By Paul Crowley
30th Sep 2020 08:21

Same here

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RLI
By lionofludesch
30th Sep 2020 09:51

Company closing down, you say ?

I wouldn't be filing amended accounts, even though they're palpably wrong.

I'd prepare VAT inclusive accounts. The profit will be the same, provided you get the VAT debtor/creditor right.

There are times for nit-picking but this isn't one of them.

Be practical. Pay the tax. Don't file the accounts at Companies House. Get the company struck off.

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By Matrix
30th Sep 2020 12:33

There are currently no entries in the accounts for VAT. So the profit is overstated by the VAT.

Why do you say the profit will be the same?

Going by other posts I will amend since, among other reasons, I would not be comfortable attaching incorrect accounts to the CT600 (the VAT inclusive accounts which I did not prepare).

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By lionofludesch
30th Sep 2020 12:46

Matrix wrote:

There are currently no entries in the accounts for VAT. So the profit is overstated by the VAT.

Before I answer, what happened to the payments to (or repayments from) HMRC?

Where are they posted ?

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By Matrix
30th Sep 2020 13:03

No VAT returns have been filed and no VAT had been paid during the period covered by the accounts so there are no entries.

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By lionofludesch
30th Sep 2020 13:13

So you included a creditor - how much ?

If you didn't include a creditor, you need to include a creditor.

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By Matrix
30th Sep 2020 13:17

No VAT was included in the original accounts, the sales were booked gross and no creditor. VAT is £10k so corporation tax is overstated and this is what I am amending.

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By lionofludesch
30th Sep 2020 13:28

Matrix wrote:

No VAT was included in the original accounts, the sales were booked gross and no creditor. VAT is £10k so corporation tax is overstated and this is what I am amending.

£10k's a lot. And I suspect your software may not allow for adding in an omitted creditor which might force your hand.

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By NH
30th Sep 2020 19:42

You've lost me on that one Lion, redo the accounts in whatever software you use and file attached to ct600 job done, its a simple thing to correct , why the heck would software not allow you to enter a creditor?

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By lionofludesch
30th Sep 2020 20:01

Tax software. Not accounting software.

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By NH
30th Sep 2020 20:24

Amend the accounts, attach to ct600, job done, why or even how would you file a ct600 without accounts attached anyway? The ct600 has never been filed

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Hallerud at Easter
By DJKL
30th Sep 2020 10:07

I am in the correct the accounts camp, I would not ever lodge accounts I knew were incorrect and if I have corrected for HMRC submission there is not a lot more to do to resubmit to Co Hse anyway (especially as TaxCalc software would have done the necessary ,if I had used it to prepare the full set the Co Hse set would be but a few button presses)

I would also be hesitant submitting the accounts before doing a thorough check for other errors, I would not be confident. I might also want to review how vat was dealt with in earlier years.

Whilst the OP merely says sales were gross he/she is silent on how input vat was dealt with, I would want to dig to work out what on earth was going on. Also does not state if the actual returns were submitted and the vat all paid, again all needs checked, and how vat payments were treated..

It may be the accounts are totally unusable and need totally redone, if so that is what I would advise the client.

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By RaxJ
30th Sep 2020 10:44

Precisely...

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By Matrix
30th Sep 2020 12:28

Thanks I redid it all, only a few transactions. So only the VAT adjustment.

I don’t think the client told the accountant they had registered the company for VAT. No idea why they didn’t file the CT600 though.

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By Matrix
30th Sep 2020 12:30

There were 3 sales amounts which I will treat as VAT inclusive, no input VAT.

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