We used an incorrect FRS rate for our participation in the VAT flat rate scheme last year. We corrected this in the last return period and paid the additional VAT due.
However, this also means we have paid more corporation tax than was due on the Flat Rate Scheme Adjustment Account (the difference between 20% and the FRS rate used, which is treated as income).
What is the correct way to adjust this? Should we put through a correction to last year's CT submission, or should we include it in the current return (when the correction was identified and additional VAT payment made)? If the latter, do we just credit the FRS account and reduce taxable income in the year?