Month end close & VAT

How to deal with locking a period/VAT invoice received

Didn't find your answer?

We lock our finance software at the end of each month, meaning any invoices for the prior months require a current month date.  If the purchase invoice has vat on it, it will be put into the current month, rather than the invoice date. How do others deal with this? Is it acceptable from an HMRC claiming perspective?

Replies (7)

Please login or register to join the discussion.

avatar
By SkyBlue22
11th Jun 2024 13:25

How quickly do you lock the month? If you regularly receive late invoices, it might be worth waiting longer. That said, I don't think I've ever come across a client that did lock months, just years.

Thanks (0)
Replying to SkyBlue22:
avatar
By TTJR
11th Jun 2024 13:58

We normally lock within a few days. This stops invoices being posted to a prior period where an accrual may have taken place for the invoice already. Otherwise on the P&L reported to Board, it would show as double counted if we were to re-run that report.

Thanks (0)
Replying to TTJR:
avatar
By SkyBlue22
11th Jun 2024 15:45

Now, I have not read the specific section of legislation for this, however HMRC's guidance specifies that invoices should be claimed in the 'proper period', i.e. the month in which they are raised. There is some leeway, but if this is continual I don't know how HMRC would view it. Ultimately, you are locking periods where you have no choice but to record invoices later than they are actually dated. I don't have a solution for you that doesn't involve not doing what you are doing. Hopefully someone else comes along with a better suggestion.

Thanks (1)
Replying to SkyBlue22:
avatar
By 17RDR12
12th Jun 2024 11:14

Some software packages are able to separate the tax point date from the reporting period that is used for management accounts purposes. I know this is possible on SAP, meaning an invoice dated 31/5/24 but posted on 12/6/24 would be recognised in period 6 (when using Jan-Dec reporting year), as period 5 is closed for posting, but would still be picked up on the VAT report for May rather than June.

Thanks (2)
avatar
By AW95
11th Jun 2024 14:02

What software do you use?

Thanks (0)
Replying to AW95:
avatar
By TTJR
11th Jun 2024 14:48

Xero

Thanks (0)
Danny Kent
By Viciuno
11th Jun 2024 17:24

Practically speaking, I'd suggest a client does what you are currently doing. Assuming the amounts are <10k (or the other conditions for VAT 652 if you are a bigger business) in one quarter the correct error adjustment is picking it up in the next return return.

At the end of the day you are probably doing HMRC a favor by postposing a VAT claim by a month (or quarter). I'd be surprised if anyone would kick up a fuss in an enquiry.

My biggest concern (if you could even call it that) would be that the invoices would be entered onto the system with the incorrect date however if you can easily trace this back to the actual supplier invoices I wouldn't be losing sleep over it.

Thanks (0)