Is anyone aware that the VAT Cash Accounting in QuickBooks Online doesn’t actually record the VAT at the right time (i.e. for HMRC Compliance) with on-account payments?
We have a client that receives a lot of up-front payments from their customers for many months, then when the customers invoice is raised, the payments are applied to it to reconcile that customers account. In QBO that is set up with VAT Cash Accounting, the VAT does not get put onto the VAT return until the point that the invoice is raised, and payment applied to it!
The VAT should, of course, get reported at the point of payment – but when receiving a payment into an Accounts Receivable account, QBO doesn’t let you do this. I suppose one solution for my clients file would be to invoice monthly – but this is not always convenient – and being a very dominant accounting software package – I’m gobsmacked that this happens.
As a workaround to be HMRC compliant, we are now having to calculate all ‘unapplied payments’ at every VAT quarter, and add in the VAT with an adjustment, then make sure we reverse it out again later, when the payments are applied in QBO, so that our client doesn’t pay the VAT twice.
Does anyone else have a better work around than this and is anyone else aware of this? (QuickBooks are, because I’ve asked them!) More importantly, knowing that QBO has now been approved for HMRCs MTD - does anyone know if HMRC are aware of this – and maybe just accept it?!