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Accounting for payments on-account (and in advance)
My accountant takes a monthly fixed DD for his services through the year, and then issues a bill after the accounts are completed - deducting the amount paid so far, and adding/deducting any further amounts as needed.
The problem...
My accountants bill is dated this month (and that's the VAT 'tax point').
BUT
I've been explaining the monthly DD transactions as 'Legal & Professional Fees' - which has quietly and incorrectly been recording VAT (at both 17.5% and 15%) on each monthly deduction.
So - clearly I got the coding wrong - the monthly DD's should not have had a VAT element, and probably should not have been coded to the P&L as the invoice only appeared well into the new year.
any suggestions what the correct appoach should have been? My thoughts include:
1. Is it a pre-payment?
2. code it as an 'other payment' and force the VAT rate to zero?
3. delete the explanations for all of the postings (unlocking the VAT periods as I go - sob) enter the invoice, and then apply all of those old payments against the new bill.
If I don't code the payments to 'Legal and Professional', then they won't appear on the P&L and I can't record them as an admin expense on my accounts!
The problem...
My accountants bill is dated this month (and that's the VAT 'tax point').
BUT
I've been explaining the monthly DD transactions as 'Legal & Professional Fees' - which has quietly and incorrectly been recording VAT (at both 17.5% and 15%) on each monthly deduction.
So - clearly I got the coding wrong - the monthly DD's should not have had a VAT element, and probably should not have been coded to the P&L as the invoice only appeared well into the new year.
any suggestions what the correct appoach should have been? My thoughts include:
1. Is it a pre-payment?
2. code it as an 'other payment' and force the VAT rate to zero?
3. delete the explanations for all of the postings (unlocking the VAT periods as I go - sob) enter the invoice, and then apply all of those old payments against the new bill.
If I don't code the payments to 'Legal and Professional', then they won't appear on the P&L and I can't record them as an admin expense on my accounts!
I’m not a proper bookkeeper
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Inappropriate?Unfortunately, (for your accountant, who should perhaps know better), I think the tax point is created when you make each payment, as described by the HMRC here.
So I think you've been doing it right in FreeAgent, and it's up to your accountant to supply you with the documents to support your reclaim of VAT...
But I might be wrong, any accountants care to comment? -
Inappropriate?My first reaction is let your accountant tell you how to sort it out at no cost!
I agree with you Ed but I can't open your link so I may be repeating what you've already said.
Just be careful Charles that your accountant doesn't argue that he is working under the "continuous supply of services" because the rules are the same as Ed quotes in the first paragraph of his reply.
http://www.hmrc.gov.uk/manuals/vattos...
I’m confident
EMPLOYEE
