SageForum for UK versions of Sage 50- Help and support.

Hello,

I use Sage Instant Accounts V21 to keep the accounts for the company I work for and am having a specific problem understanding how to deal with a mismatch in tax codes. I understand that in Cash Accounting there is an error if the tax codes do not match, however I'm not sure how to correct the following error:

I post our monthly DD payments to our energy supplier as payments on account. Due to the tax rules for energy supply, we can be charged either 5% or 20% VAT depending on how much is used in any given period. Usually it is 5% and so I have been recording the payments on account with a 5% tax code. Now I have received our latest bill for the past 6 months and we have been charged 20% VAT. The monthly payments on account to cover this bill date back over 6 months and so have been bank reconciled and included on VAT returns, hence are not editable. My problem is how to correct not only the tax code mismatch, but also the incorrect amount of VAT that has been recorded by the POAs at 5% compared to that charged on the bill at 20%.

I hope this makes sense and that there is a relatively simple solution, but I cannot get my head around it...

Many thanks in advance for any help.

I would do a supplier refund of the amounts paid.
Then do a supplier payment and just match it against the outstanding invoices and it will use the correct tax code for you.

This will create a dummy refund and payment on the bank account
(I would do it in petty cash so that I don't have to cancel the 2 transactions on the bank rec)

Thank you, that makes sense.

Would you suggest dating the refunds with a current date or posting them with the original posting date? Would it make any difference?

Also, would it matter if I did post the refund and payment from the main bank account? Surely they would cancel each other out at reconciliation? I am just thinking that this may be easier for our accountant to see what I have done when it comes to year end...

They must both be the same date, if you back date them then the vat return will pick them up as transactions from "a previous period" you should always be including previous period transactions anyway so they should be picked up.

Main bank is fine, you just need to "dummy" reconcile them.

Thank you very much for the advice - I have now had the chance to give it a go and it has worked as I was hoping...

Can anyone suggest a way to avoid this happening in future, given that I have to post monthly POAs but do not know whether the invoice will be 5% or 20% VAT until it arrives??

There is no way to avoid this.

Under cash accounting you account for VAT when you make the payment so you have to specify the vat rate when you put it in, if you use the wrong rate, you make a false account so you have to make correcting entries afterwards.