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VAT Returns submitted incorrectly

VAT Returns for full financial year submitted incorrectly by previous accountant

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Hi All

I took over a client recently, i am preparing their year end as well as moving to MTD software and making sure they are all compliant for VAT submissions.

By preparing the accounts i have come accross errors on all VAT returns submitted by the previous accountant totalling a material under declaration of +£6k

Now for the purpose of the year end accounts as at Dec 2018 should i make an adjustment to the sales/purchases/VAT and move the liability to the following year where i will complete VAT652, any fines surley shouldn't be the clients as theyr were paying for a service.

Box 6 under declared by £20,021.11

Box 7 over declared by £15324.40

Its been a right mess!

Any advice on year end process would be greatly appreciated.

Replies (7)

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By Accountant A
18th Aug 2019 12:43

learose wrote:

any fines surley shouldn't be the clients as theyr were paying for a service.

You can delegate authority but not responsibility (as a general rule). Your client can seek damages from the former accountant if they have lost out. Was the client invited to approve the incorrect returns before they were submitted?

Thanks (1)
Replying to Accountant A:
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By learose
18th Aug 2019 18:59

From the conversation i have had no they were not - she provided the information, the accountant worked on the VAT and just told them what to pay by when.

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By NH
18th Aug 2019 16:33

error less than than 10k, no need for VAT652, adjust the next return.
accounts should be prepared with the correct figures.

out of interest why was there an error in each quarter?

Thanks (2)
Replying to NH:
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By learose
18th Aug 2019 19:08

Hi - Thank you for your advice.

The accountant by the looks of it went by the spreadsheet the client sent ONLY without checking any detail by the looks of it. If they had checked they would have seen receipts that had not been accounted for, cash deposits in the form of cheques and cash not accounted for.

They were cash accounting but including purchase invoices that had] not paid yet in the returns.

Items that should have no VAT such as insurance and medical cover had VAT on them...crazy really.

The client asked for help and training however they didn't give it hence she has come to me

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By frankfx
18th Aug 2019 21:13

Boxes 6 and 7 ?

The errors in those boxes do not necessarily mean that the overall VAT due and paid is over £6000 adrift.

Boxes 1 2 4 are the £ critical boxes for showing the real liability to HMRC

Ideally boxes 6 and 7 can be reconciled.
But in themselves do not mean that VAT of £6000+ is due

I may have an unorthodox golf swing.

But the end result is a straight drive clearing the fairway bunkers.

Dodgy boxes 6 and 7 may not be a true correlation of VAT liability.

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Replying to frankfx:
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By johnhemming
19th Aug 2019 09:12

I spent some time on the issue of adjustments to boxes 6, 7, 8 and 9. HMRC have a system for adjustments to the net vat (which would come from 1-4 in some way). However, they don't seem to have any rules on adjustments to boxes 6-9 - although one would assume that the figures consequent to any adjustments in 1-4 would be there.

For example I have found that for flat rate vat some taxpayers report the gross amount of supplies in box 6 and some taxpayers report the net amount of supplies in box 6.

There is, however, no system for correcting this (as it does not necessarily affect the net tax if you calculate the net tax correctly anyway).

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Replying to johnhemming:
By ireallyshouldknowthisbut
19th Aug 2019 09:55

Boxes 6-9 are essentially ignored. Box 2 is quite frankly largely ignored too.

The point of them was historic. HMRC used to try and check your turnover to the accounts, but gave that up for a bad job 15-20 odd years ago given they cant penalise you for getting it wrong, so long as the VAT is right.

The only point now is to give a "howler" alert, which may trigger a tax review by HMRC.

So if you prepare accounts they are just a "meh" assuming you run proper reviews and checks on the figures before they get anywhere near the final boxes.

of course many people seem to just "file what the software says". See thread on Friday from the Xero user who didn't know how their own software worked for late claims and had been ballsing it up for years by the sound of it.

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