Completing VAT returns - Week 3

Question 1

Adjustments in previous VAT returns can be made to correct errors that are:

Answer 1

• below the ‘error correction threshold’, which is the greater of £10,000 or loss or up to 1%(maximum 50,000) of total value of sales and all other outputs excluding any VAT
• not deliberate
• for an accounting period that ended less than 4 years ago

Question 2

If the value of a net VAT error discovered is above the reporting threshold, or was deliberate:

Answer 2

It must be declared to HMRC separately(HMRC VAT Correction team) in writing.

Question 3

VAT return boxes:

Answer 3

1. VAT due in this period on sales and other outputs
2. VAT due in this period on acquisitions from other EC Member States(Not in exam)
3. Total VAT due (the sum of boxes 1 and 2)
4. VAT reclaimed in this period on purchases and other inputs(including acquisitions from the EC)
5. Net VAT to be paid to HM Revenue & Customs or reclaimed by you (Difference between boxes 3 and 4)
6. Total value of sales and all other outputs excluding any VAT
7. Total value of purchases and all other outputs excluding VAT. Include your box 9 figure
8. Total value of all supplies of goods and related costs, excluding any VAT, to other EC Member States(not in exam)
9. Total value of all acquisitions of goods and related costs, excluding any VAT, from other EC Member States(not in exam)

Question 4

Reasons for any given differences between the VAT return and the VAT control account are:

Answer 4

• Amendments to the accounting records have not been reflected in the accounting software
• Amendments to the accounting software have not yet been made in the accounting records
• The software may have been set up for the incorrect rate or scheme

Question 5

Information required for signing up for HMRC online services

Answer 5

• The VAT registration number of the business
• The final month of the last VAT return submitted
• The date of registration for VAT
• The Box 5(VAT liability) figure from the last VAT return
• The postcode of the principal place of business

Question 6

Information required in the sign-up process for MTD

Answer 6

• The business email address
• A Government Gateway user ID and password
• The business’s VAT registration number and latest VAT return
• The National Insurance number of the taxpayer if they are a sole trader
• The company registration number and Unique Taxpayer Reference if it is a limited company or registered society
• The Unique Taxpayer Reference and the postcode where the business is registered for Self Assessment if it is a general partnership

Question 7

The VAT return (VAT 100) produced by MTD software should summarise the VAT account. This will show:

Answer 7

• Output VAT charged on sales
• Input VAT suffered on purchases used in the business
• Net amount payable or repayable

Question 8

Reasons why the VAT return produced by MTD and the VAT liability shown on the VAT control account may not reconcile are:

Answer 8

• The VAT software has been set up incorrectly; for example, it may be using an incorrect VAT rate or may have have been set up to use a special scheme
• Amendments made in the accounting systems have yet to be input into the VAT software, e.g. the adjustment for a prior period error, bad debt relief, or adjustments to input VAT recovery for a partially exempt business
• Amendments made in the VAT return software are not yet reflected in the accounting systems(e.g. the VAT on imports accounted for through postponed accounting)