Why does VAT on the VAT Return differ from the VAT account balance in the balance sheet?

You might see a difference between the VAT payable or refundable on your VAT Return and the VAT account balance in your balance sheet for these reasons.

  • You may have run your VAT Return and your Balance Sheet report on different accounting bases. That is, you ran one on the cash basis and the other on the accruals basis. Run both reports on the same basis to get an accurate comparison.
  • Your VAT account balance is cumulative, so it may include VAT amounts from previous periods. Run the Account Transactions report for the same period as your VAT Return to see VAT account transactions just for that period. You'll need to exclude payments to or refunds from HMRC for prior periods.
  • The VAT account includes VAT adjustments made by manual journals. VAT adjustments using the 'No VAT' tax rate aren't included in the VAT Return.