How to make corrections in a VAT locked period

This article explains how to make a correction in FreeAgent that falls into a VAT locked period if you've already filed your VAT return. The correction, or deleted item, will then show on your current, open VAT return.

Please note that if the correction relates to a transaction dated in a previous VAT registration period, the VAT effects won’t appear on a VAT return in a new VAT registration period. Instead, they’ll go to account ‘817 - VAT’ as detailed below.

Editing invoices in a VAT locked period

An invoice is a legal document between you and your customer. If it’s been sent to them, but needs to be updated, we recommend that you create a credit note, net it off with the historical invoice and then create a new invoice.

Alternatively, you can choose to edit the invoice instead.

How edited transactions will be dealt with for VAT

If you edit or delete a transaction in a VAT locked period, FreeAgent will preserve your existing locked VAT return and make any necessary changes on your next unlocked VAT return. This is per HMRC’s guidance for how VAT errors should be corrected.

HMRC only allows errors to be corrected through VAT returns that are within four years of the transaction date. If the transaction you edit is dated more than four years before the beginning of your current open VAT return, FreeAgent won’t make any changes. For any older errors you would need to complete and file a separate HMRC form, form 652.

How to add a transaction that doesn’t affect VAT

If you have filed VAT returns and you need to add bank transactions, bills or expenses, but you don’t want FreeAgent to automatically make the changes on your next unlocked VAT return, select 'Out of Scope' from the 'VAT' rate drop-down menu.

How to make the corrections

Edit your invoices, bills, bank payments and expenses as you would do to correct any other errors.

FreeAgent will then make those changes on your next unlocked VAT return.

Editing transactions in a previous VAT registration period

Once the final VAT return of a VAT registration period has been filed, or marked as filed, the VAT registration period is locked and changes can’t be made to any of the VAT returns that fall within that period.

HMRC doesn't allow corrections from one VAT registration period to be reported on a VAT return filed with a different VAT registration number. This means that if you have set up an additional VAT registration period after previously de-registering for VAT, any changes you make involving VAT to invoices, bills, bank payments and expenses dated in the original VAT registration period will not be included on a VAT return in your new VAT registration period.

Instead, the VAT effects of the changes will be posted instead to account ‘817 VAT’. You can view the correction on your VAT ‘Statement of Account’ by navigating to the ‘Taxes’ tab at the top of the screen and selecting ‘VAT’ from the drop-down menu.

You will then need to write to HMRC about the error and they will advise on how to pay or reclaim any VAT due.