Does anyone have a workaround in QBO for VAT accounting for advance payments at the time the payment is received (tax point) as opposed to the invoice date which in the events industry, is often many months in the future. I'm using VAT cash accounting on the Flat Rate Scheme as all payments are in advance so no advantage to using accruals as the tax point will always be the same date for both methods in my scenario. I believe it's a well known issue that QBO doesn't deal with this as it should. It will only add cash payments to the VAT return when matched to an invoice dated in the same quarter and not when the invoice date falls in a future quarter. It's a fundamental flaw.
My hoped for workaround (proving to be unsuccessful) is as follows:
Create a temporary customer called VAT Temp.
At the end of the VAT period, run a report and add up all advance payments received that quarter for invoices in future tax periods (hence incorrectly not being picked up by QBO). Create a sales invoice for this amount for the above debtor.
I then allocate a cash payment to this.
Correct amount is then posted to VAT Control and VAT return.
This is where the problems start. I have to reverse the sales as they'll be picked up at the date of the invoice (accruals basis) as it's only VAT for which I'm using the cash basis.
I create a credit note. Sales and VAT Control are debited.
I then reverse the cash payment. As log as this isn't matched to the debtor, this won't be included in the next return. It sits on the debtor account and the balance is zero.
Now the problem. The VAT Control account has been debited and this amount will remain on the VAT Control account. It shouldn't be on that account but the million dollar question is if I journal out, what is the corresponding double entry?
Dr ????? Cr VAT Control
I realise this is a niche question but I'd be very grateful if someone can point me in the right direction. It may be I'm missing something glaringly obvious!
I've spent so long looking I couldn't see it now if it bit me on the a***.
Many thanks in advance