Introduction

Properly managing VAT for expenses, such as utilities paid via fixed direct debits, is crucial for accurate VAT reporting in Scribe Accounts. This guide outlines the recommended procedure for adjusting VAT without manual adjustments to the VAT Form 126, ensuring compliance with Making Tax Digital requirements and maintaining accurate financial records.

Challenge with Direct Debits and VAT

Utilities paid through direct debits might not initially include VAT details, leading to discrepancies once the actual VAT-inclusive invoice is received. To align your records with the actual VAT incurred, Scribe Accounts facilitates a process involving reversing and correcting entries.

Recommended Process for VAT Adjustments

1. Record the Direct Debit Transaction:

   • Initially, enter the direct debit transactions as they occur, without VAT, matching the payments made.

2. Adjust VAT upon Receiving the Invoice:

   • When the invoice with VAT details is received, you'll need to make adjustments in Scribe Accounts through reversing and correcting entries, rather than directly editing the initial transaction.

3. Making Reversing and Correcting Entries:

   • Reversing Entry: Create a transaction that reverses the original direct debit entry. This negates the initial transaction without VAT.
   • Correcting Entry: Immediately follow with a new entry that reflects the total amount paid, including the correct VAT as per the received invoice. This ensures that your VAT records accurately reflect the actual VAT to be reclaimed.

4. Steps to Enter Reversing and Correcting Entries:

   • Navigate to Transactions → Payments or Receipts, depending on the nature of the original transaction.
   • For the reversing entry, enter a transaction identical to the original but with negative amounts to offset it.
   • For the correcting entry, enter a new transaction that includes both the net amount and the VAT as detailed on the invoice.

5. Review VAT Reporting:

   • After making these adjustments, check your VAT Summary (Navigate to VAT → VAT Summary) to confirm that the VAT from the correcting entry is accurately reflected for your next VAT submission.

Avoid Manual Adjustments to VAT Form 126

Manual adjustments of the VAT Form 126 are discouraged due to potential discrepancies and complications in VAT claims. Adjusting transactions within Scribe Accounts using the reversing and correcting entry method ensures accurate and compliant VAT reporting.

Conclusion

Adjusting VAT for utilities and other expenses paid through direct debits in Scribe Accounts requires careful entry of reversing and correcting transactions. This method ensures that your VAT records accurately reflect actual expenditures and VAT, maintaining compliance and accuracy in your financial reporting.

Should you need further assistance or have questions about this process, please contact our support team.