In an ideal world, the VAT balance on your business’ balance sheet should show the same number as on your VAT return.
Whether it does will depend to a certain extent on whether you’re using invoice accounting or cash accounting to account for your VAT.
If you’re using the accrual/invoice accounting method then, technically, your VAT should match your accounts if the last day of your accounts coincides with your VAT return.
In reality, it’s only in rare circumstances that this is the case. It’s not something to worry about – it’s down to how up to date your accounting data is, and when the VAT return is submitted.
If you’re using the cash accounting method then there will always be a difference between your VAT balance and your VAT return number.
That’s down to the fact that you’re accounting for your VAT from the day your customer PAYS you, not the day you raise the invoice. As such, there will always be a discrepancy between the two VAT numbers.
Make sure those numbers are correct
Although it’s rare for the two VAT numbers to match, it’s important to regularly check that your VAT has been accounted for correctly. Get your accountant to check over the accounts and make sure that a discrepancy isn’t a sign of a bigger problem lurking under the surface.
HM Revenue & Customs (HMRC) will soon spot a shortfall, so it’s best to proactively look for any errors and to resolve them before HMRC starts breathing down your neck.
If you’d like us to help with your VAT, please do give us a call on 01454 300 999, or drop an email to firstname.lastname@example.org