Correct transactions included on a VAT return

Summary

How to correct transactions included on a VAT return in Sage Accounting.

Description

To correct an error on your VAT return, you'll need to reverse the transaction. You'll then re-enter it with the updated details.

For transactions included on draft VAT returns, delete the draft. Once you've done this you can amend or delete the transaction.

Resolution

How this works

Once you include a transaction on a VAT return, you cannot delete or edit it.

Having an incorrect transaction can mean that:

Your bank account balance is incorrect
The balance of your customer or supplier account is incorrect
Your VAT return has incorrect figures, and you may overpay or underpay VAT

To make the necessary adjustments, you must

Create a reverse or opposite transaction. This cancels out the value of the incorrect transaction.
Re-enter the transaction with the correct details, if required.

See an example

You enter a payment for €120 for some office supplies twice by mistake. You don't notice this straight away and it's now included on a VAT return.

Your bank account balance is now €120 less than it should be
You've declared an extra €20 on your VAT return
When you report on office supplies purchases, it is €100 more than expected

To make sure your bank account and VAT return are correct, you enter an Other Receipt to reverse this. You use the same date, amount, ledger account and VAT rate.

Your bank account balance increases by €120 and is now correct
Your next VAT return gets adjusted by €20
Your office supplies are now €100 less and are correct

NOTE: Any corrections that you make will appear when you create your next VAT return.

Which transaction to use

Reverse an other payment with a refund
Reverse an other receipt with a refund
Reverse a supplier payment with a supplier refund
Reverse a customer receipt with a customer refund
Reverse a refund with a payment on account
Reverse a bank transfer with another opposite bank transfer

Reverse an other payment

To make the necessary adjustments

Create a refund to reverse the receipt - This creates an opposite transaction
Re-enter the transaction with the correct details, if required

Once saved the refund shows on your next VAT return, reversing the original receipt.

From Banking, choose the relevant bank account.
Select New, then Sale / Receipt.
Choose Other Receipt tab, then the Enter a refund for a purchase link.
Enter the details of the transaction you want to reverse.

Reverse an other receipt

To make the necessary adjustments

Create a refund to reverse the receipt - This creates an opposite transaction
Re-enter the transaction with the correct details, if required

Once saved the refund shows on your next VAT return, reversing the original receipt.

From Banking, choose the relevant bank account.
Select New, then Purchase / Payment.
Choose Other Payment tab, then the Enter a refund for a sale link.
Enter the details of the transaction you want to reverse.

Reverse a supplier payment

If the payment paying an invoice, unallocate the payment first. The payment then becomes a payment on account.
Create a refund with the same details as the payment.
Allocate the refund to the payment on account.

Reverse a customer receipt

Do this when you use the Cash Basis scheme, and you've included the receipt on a submitted VAT return.

The refund clears the value from your customer account and bank account. It also updates the VAT return. The sales invoice now shows as Unpaid.

If the receipt is paying an invoice, unallocate the receipt first. The receipt then becomes a Payment on account.
Create a refund with the same details as the receipt.
Allocate the refund to the payment on account.

Reverse a refund

If you use the Cash Basis scheme, and the refund is on a submitted VAT return, you can't edit or delete it.

Enter the reverse transaction to clear the value from your customer/supplier account and bank account. This also updates the VAT return.

Reverse a refund allocated to a credit note

As you can't delete or unallocate the refund, you reverse the value of both the credit note and the refund. Create a new invoice and a new payment with the same date, bank account, amount, and ledger account.

This removes the refund from your bank account balance and updates the balance on your customer/supplier account. It also updates your VAT return.

Create a new invoice with the same date, ledger account and amount as the credit note. This reverses the credit note.
- From Purchases / Sales, choose Purchase / Sales Invoices, then New Purchase / Sales Invoice
- Enter the details identical to the original credit note, and Save
Pay the invoice. This reverses the refund.
- Once you've saved the invoice, choose Record Payment. Make sure you select the same bank account
Enter a new credit note and refund with the correct details.

Once saved

The new payment shows on your bank account, cancelling out the value of the refund
We recommend that you reconcile the new payment straight away. This is to make sure your balances are correct before your next bank reconciliation
The invoice and the new payment show on the customer/ supplier account, cancelling out the value of the refund and credit note
The new payment/ receipt gets reported on your next VAT return, cancelling out the previous refund
Enter a new credit note and refund with the correct details

Reverse a refund allocated to a payment on account

As you can't delete or unallocate the refund, you must reverse the value of the refund. Create a new payment/receipt with the same date, bank account and amount. This updates the balance of the bank account, the balance of the customer/supplier account and the VAT return.

From Banking, open the correct bank account.
Select New Entry, then Purchase / Payment or Sales/ Receipt.
Select the Supplier Payment or Customer Receipt tab. Enter the customer/ supplier, bank account, payment method, date, amount, and VAT rate. This must be the same details as the original refund.
Choose Save and select Yes to save as a payment on account.

Once saved:

The new payment or receipt shows on the bank account, cancelling out the value of the refund. We recommend you reconcile the new payment/receipt straight away. This is to make sure your balances are correct before your next bank reconciliation
The new payment/receipt gets reported on your next VAT return, cancelling out the previous refund

Reverse a bank transfer

Here you simply enter the transfer in reverse. This cancels out the original transfer. You'll still see both transfers in your bank reconciliation and Activity list.

Go to Banking, then select New, and Bank Transfer.
Enter details of the transfer. You must enter
Paid from Bank Account - the bank money was originally transferred to
Paid into Bank Account - the bank the money was originally transferred from
Date Transferred
Amount Transferred
Click Save.