MTD horror story: Small business makes £19,000 of VAT errors
Neil Warren reveals how a small business adopting new software to comply with MTD for VAT made £19,000 of VAT errors on its first MTD return.
I had a bet with myself as to when I would get my first VAT query from an accountant where a client had made a mess of a VAT return submitted under MTD. I expected to have received at least one horror story by the end of April, relating to the March VAT period which many businesses had signed up to submit as part of the MTD pilot scheme.
- Output tax had been duplicated on sales debtors at the end of December 2018, ie where output tax had already been included on that return and was therefore paid again on the March return when the customers paid their bills.
- The same problem occurred with input tax, a duplication of input tax.
- Output tax had not been paid on unpaid sales invoices at the end of March 2019, or input tax claimed on unpaid purchase invoices.
The errors with the final bullet point were not an issue if the client adopted the cash accounting scheme (which he was eligible to do), but the first two bullet points were errors which had to be corrected.