It's a wonderful idea but unfortunately the service is a bit like a 50 year old car - some days it will work some days it won't. I suspect future updates will start sorting the problem.
Had I omitted the amount, HMRC insist it would have been a deliberate error and thus a fine of up to 70% would have to be set.
Your right regarding your second point, the customers wouldn't be happy with it. It is an unfortunate situation because apparently the customer was not supposed to make the payment. A proforma was issued detailing the goods and the amounts and their accounts department just paid it without question. Added to the fact it was made on the very last day of the VAT quarter. Sadly, no leniency from HMRC.
Spoke directly with HMRC who insisted on the VAT being declared. They say an advanced payment was received on the last day of the VAT quarter therefore the tax point becomes the date the funds enter the bank account. The fact no supply was made thereafter makes no difference - VAT must be declared. The VAT can be recovered in the next VAT quarter when the refund was made.
If the issuer of a pro-forma invoice subsequently receives payment and/or makes a supply, a full VAT invoice must be issued within 30 days. The tax point will follow the normal rules."
Payment was received so it has to follow the "normal rules" - ie the tax point becomes the date payment is received.
The problem is it spans two VAT quarters. The money received is in quarter 1, the money is paid back in quarter 2. I can see no guidance from HMRC to indicate what length of time between the two is acceptable to say "it is no deposit as such"
FL Memo says the following about deposits (which an advanced payment effectively is):
"VAT on deposits which represent an advance payment must be accounted for when the deposits are received or paid. If the deposit is refunded then the VAT originally accounted for can be reclaimed".
But if client is on cash accounting, as at the date of the VAT return, it would not have mattered if the goods were delivered or not, output vat would need to be declared on what was effectively a 100% deposit no?
My answers
It's a wonderful idea but unfortunately the service is a bit like a 50 year old car - some days it will work some days it won't. I suspect future updates will start sorting the problem.
I make your balance sheet:
Stock 757
Cash at Bank 355
Total 1112
Balanced by
Directors loan 1086
Shares 1
Retained profit 25 <<<< This is the balancing figure and should agree with your P & L
Total 1112
Had I omitted the amount, HMRC insist it would have been a deliberate error and thus a fine of up to 70% would have to be set.
Your right regarding your second point, the customers wouldn't be happy with it. It is an unfortunate situation because apparently the customer was not supposed to make the payment. A proforma was issued detailing the goods and the amounts and their accounts department just paid it without question. Added to the fact it was made on the very last day of the VAT quarter. Sadly, no leniency from HMRC.
Spoke directly with HMRC who insisted on the VAT being declared. They say an advanced payment was received on the last day of the VAT quarter therefore the tax point becomes the date the funds enter the bank account. The fact no supply was made thereafter makes no difference - VAT must be declared. The VAT can be recovered in the next VAT quarter when the refund was made.
Practice Partner -
From HMRCs VAT manual:
"Output tax
If the issuer of a pro-forma invoice subsequently receives payment and/or makes a supply, a full VAT invoice must be issued within 30 days. The tax point will follow the normal rules."
Payment was received so it has to follow the "normal rules" - ie the tax point becomes the date payment is received.
The problem is it spans two VAT quarters. The money received is in quarter 1, the money is paid back in quarter 2. I can see no guidance from HMRC to indicate what length of time between the two is acceptable to say "it is no deposit as such"
FL Memo/Indicator are a well known publishing company that produce handbooks to various professions. The passage I quoted is from their VAT manual.
It doesn't clarify when the VAT can be reclaimed but if the client is cash accounting then I assume it is on the date payment leaves the bank account.
FL Memo says the following about deposits (which an advanced payment effectively is):
"VAT on deposits which represent an advance payment must be accounted for when the deposits are received or paid. If the deposit is refunded then the VAT originally accounted for can be reclaimed".
No, goods were never delivered.
But if client is on cash accounting, as at the date of the VAT return, it would not have mattered if the goods were delivered or not, output vat would need to be declared on what was effectively a 100% deposit no?
This is complex and you should take further advice as important points arise such as:
Rent paid by the company must be declared by the individual charging the rent
Any capital gains implications if the house is sold given that you are renting out a room for business purposes