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Troubleshooting VAT Recoverable Discrepancies: A Guide for Councils

At the end of the financial year, your VAT recoverable figure should align perfectly with the amount you are due to reclaim from (or owe to) HMRC. If these figures don't match, it usually points to a data entry error or a prior year adjustment that hasn't been accounted for. Use the following checklist to identify and resolve these discrepancies within Scribe.

1. Verify the Opening VAT Figure

The foundation of your current year's VAT is the closing position of the previous year.

  • The Check: Ensure the outstanding VAT amount as of 31st March of the previous financial year is recorded correctly.

  • Where to look:  Setup -> Bank Balances / VAT

    • Setup -> Restate Last Year (This is critical for councils working on an Income & Expenditure basis).

  • The Goal: This figure must match the actual claim submitted to or payment made to HMRC for that period.

2. Review VAT Refunds and Payments

If a refund from HMRC is recorded as standard income rather than a VAT transaction, your "Recoverable" balance will remain artificially high.

  • The Check: Review all VAT-related receipts or payments in your cashbook.

  • The Fix: Ensure these transactions are specifically allocated to the VAT type 'R: Refund'. This tells the system that the cash received is clearing an existing VAT debt/asset rather than acting as new revenue.

3. Audit Prior Submissions

A discrepancy often arises if a transaction from a previous period was edited after the VAT return for that period was already submitted.

  • The Check: Re-run your VAT Form 126 (for non-registered councils) or VAT 100 (for registered councils) for the date ranges of your previous submissions.

  • The Comparison: Compare these "live" reports against the physical copies of the claims you actually sent to HMRC.

  • What to look for: Has a VAT rate been changed on an old payment? Was a transaction deleted or added to a period that is already "closed" in your mind?

4. Reconcile Liabilities, Interest, and Penalties

For VAT-registered councils, the amount hitting your bank account might not match your Box 5 figure due to interest or penalties.

  • Navigate to: VAT -> VAT Liabilities

  • Identify the Charge:

    • Credit Charge: VAT to be repaid to the Council.

    • Debit Charge: VAT owed to HMRC.

  • Account for Extras: Check for separate lines such as 'VAT Interest Repayments' (HMRC pays you) or 'VAT Interest' / 'TG PEN' (You owe HMRC). If these aren't recorded correctly, your total VAT recoverable balance will not reconcile with the net cash movement.

Next Steps

Once you have identified which area is causing the mismatch, please contact the Scribe Support Team. We can provide specific guidance on the best way to process the correction—whether via a journal entry or a transaction amendment—to ensure your year-end accounts are accurate.