Use FreeAgent’s VAT checker

This article explains how to use FreeAgent’s VAT checker to identify and fix potential errors in your client's bookkeeping that might affect their VAT return.

The VAT checker will identify potential VAT anomalies from the following types of transactions:

1. Items with a VAT rate that differs from the default rate for that category.
2. Items with a custom VAT value.
3. Items with VAT rates other than the standard rate (for example, transactions whose rate is 0%, 5% or Exempt).
4. Items where VAT has been added to transactions with a non-UK customer or supplier.

1. Switch to the client’s account

Log in to your Practice Dashboard and select ‘Switch to’ beside the relevant client to access their account.

2. Navigate to the VAT return

Within your client’s account, navigate to the 'Taxes' tab at the top of the screen and select 'VAT' from the drop-down menu.

Next, select the VAT return that you would like to run the VAT checker on.

3. Run a VAT check on the return

Within the ‘VAT Checker’ section on the right-hand side, select ‘Run VAT check’.

The VAT checker will generate a report that summarises all the potential VAT anomalies it has found. These will be categorised into four different types:

1. Items with a VAT rate that differs from the default rate for that category.
2. Items with a custom VAT value.
3. Items with VAT rates other than the standard rate (for example, transactions whose rate is 0%, 5% or Exempt).
4. Items where VAT has been added to transactions with a non-UK customer or supplier.

The VAT checker will soon include items that are out of scope of VAT in the report.

4. Review and fix items

Select the type of items you’d like to review by selecting ‘View’.

You’ll see all the items of the selected type within the ‘Results’ tab and FreeAgent will explain why they have been identified as potentially incorrect.

Select the checkbox next to each item you want to fix. To quickly select all the items on a page, tick the box that appears to the left of the ‘Date’ column.

Please note:

• If an out-of-pocket expense or bill line item has already been added to a project and rebilled on an invoice, the out-of-pocket expense or bill line item will be locked and you won’t be able to fix it. Please see below for how to fix a locked out-of-pocket expense or bill line item.
   
• If you’re fixing invoice line items, the screen will look different. Please see below for how to fix an invoice line item.

Once you’ve selected the relevant items, select ‘Proceed to fix items’. Please note that you can only correct a maximum of 100 items at a time.

Select which changes you want to be made to the items and select ‘Fix [X] items’. You can make changes to the accounting category (nominal code), VAT rate and/or description.

Finally, wait for the selected changes to be applied. Please note that this may take a few minutes if lots of corrections are being made.

Once the updates have completed, you’ll be returned to the report results screen where a notice will tell you the outcome of your update.

Fixing a locked item

If an out-of-pocket expense or bill line item has been added to a project and rebilled on an invoice, you’ll be able to fix the description and/or accounting category but not the VAT rate. This partial lock applies even if the invoice is in draft status.

To fix the VAT rate of a partially locked item that has been rebilled on an invoice, you'll need to first edit the invoice to delete the item from it. You'll then edit the bill or out-of-pocket expense to remove it from the project. Before you can edit an invoice, it must be in draft status. If the invoice or bill has been marked as paid, you’ll need to remove the payment link first.

To fix the VAT rate of a partially locked item that has been linked to a project, you'll need to edit the item in question to remove it from the project.

Once the partially locked item has been removed from the invoice, and/or unlinked from the project, you’ll be able to fix the VAT rate.

Please note that items in a locked accounting period can’t be fixed at all.

Fixing an invoice line item

To fix the VAT rate of an invoice line item, select ‘View’ to the right of the line item.

This will take you to the invoice where you can mark it back to draft status and edit the line item(s).

Once the invoice line item has been fixed, you can return to the VAT return and run another VAT check.

Please note that invoice line items in a locked accounting period can’t be fixed at all.

View a history of VAT checker corrections

Once you’ve made corrections to items using the VAT checker, you can view a history of all corrections that have been made through the VAT checker within the ‘History’ tab for a maximum of two years.

To view the details of any of the corrections, you can select the ‘View details’ button next to the relevant correction.

This will show you a summary of when the item(s) were corrected, who made the corrections and what changes were made.