INS12652 - Accounting issues: Appropriations
General
The basic principle of appropriation is that any money brought to account, must be allocated to specific periods. In theory this should leave, where possible, the ledger balance at nil. Unless the payments are period/and or type specific, then the appropriation is in the order of the oldest notified debt.
The computer automatically appropriates any monies received on the account to the period(s) with the oldest notified debt. If debts are notified on the same date then appropriation is in the following order.
- Interest Bearing Tax.
- Non Interest Bearing Tax.
- Surcharge.
- Penalty
- Interest
Appropriation in insolvency cases
Pre-relevant Periods
Upon the input of the VAT 769 any pre-relevant credits on file will be posted and automatically appropriated against any debts on file. Therefore in the majority of cases no caseworker action will be required.
However, if the ledger requires accounting action after the input of the VAT 769 e.g. ledger balance is not nil, non-appropriated credit (not Crown set off case) then it is likely that corrective accounting action is required. The primary cause of a credit in the non-appropriated ledger upon insolvency is we may have received a ‘preference’ payment, i.e: a payment made by the trader within three months of the insolvency being accepted. The IP should be notified of the situation and made aware as to the reasons for the ‘unsolicited’ payment.
Post-relevant Periods
Where credits require appropriation after the relevant date, form V907 should be used.
Debts to which credits may be appropriated are listed on the outstanding liability table (OLT). The OLT shows the traders net liabilities in the form of the earliest notified debt. (See Table).
VAT 907 guidance notes
Introduction
A VAT 907 is used to reassign any available credit against any outstanding debt. It can also be used to set up credits to be repaid.
Available credits will usually appear as one of the following:
- Mismatch Credit.
- Non Appropriated Credit.
- Credit Inhibited.
- Claim Return.
- Credit Pending.
Available credits may also be identified from the OLT i.e. the OLT shows the original liability amount and the current liability balance, if the debt has been paid or part paid there will be a difference between the two amounts, this difference is a credit which may be available for allocation to a different period if the circumstances require reallocation e.g. if a payment has been allocated to the wrong period on the VAT account.
The type of credit available will determine how the VAT 907 is completed.
Completion instructions
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Box 1 |
VAT Registration Number. |
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Box 2 |
The date used is usually the ledger date where the credit is available. However if the credit is being extracted from the OLT then the liability date is used. If the credit has been posted but is inhibited then the date on which it was inhibited should be used. If a credit has already been appropriated to a specific period and the liability has dropped from the OLT the date used will be liability date of the original debt. This can be found in the ledger in the reference column (see table). If the ledger does not go back far enough a VAT 130/128 will be required. |
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Box 3 |
The type used will depend on what credit is available. 00 ……………………for mismatch credits/non appropriated credits. 96 …………………… for not posted credits. 98 …………………….for pending or inhibited credits. 01-89 will be used if a credit is being extracted from a line in the OLT i.e. the liability amount is greater than the outstanding liability balance. 97 is to be used if a credit is to be extracted from a period which has been paid in full and dropped from the OLT, this will create a corresponding debt in the OLT. |
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Box 4 |
Amount of credit to be reassigned. If the type is 00, 96 or 98 the amount to be reassigned must equal the full credit available in the specific ledger line from which the credit is to be extracted. If the type is 1-89 or 97 the credit to be reassigned can be any amount up to the full value of the credit available. |
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Box 5 |
Period from which the credit is to be taken. When using type 00 the period reference must always be 00/00. For all other types the period reference will be that from which you are extracting the credit. |
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Box 6 |
Ledger date where credit is to be reassigned. If the reassignment is to a specific period the date used must be the same as the date which the liability appears in the OLT. If the reassignment is not period specific the date will be 99/99/99. |
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Box 7 |
If the reassignment is period specific the type used will be the one which appears on the OLT line. If not period specific the type will be 90 if the credit is to go against the pre relevant debt or 99 if against the post relevant debt. |
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Box 8 |
The amount in this box must equal that in box 4. There may be occasions when the credit you are reassigning is greater than the debt you want to clear, however the amount in this box must still equal that in box 4. Any excess credit will be set up as a credit pending. A maximum of 9 reassignments may be made to any outstanding debts. |
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Box 9 |
The period will be that which the credit is being reassigned into or 00/00 if the type in box 7 is 90 or 99. |
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Box 10 |
Number of reassignment lines used. |
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Date of receipt when the liability is an O/A interest bearing tax (type 01 reassignments only). This box will only be used if the type in box 7 is 01. The date entered will be the original date the officers assessment liability appeared in the ledger. |
Other Accounting adjustments - VAT 915
When accounting adjustment action is required that cannot be resolved by use of a form such as VAT 907, then VAT 915 action may be required.
VAT 915 is a multi-purpose form, but usually it is used by NIU for two functions:
- transfer of credits from one registration to another.
- transfer payments out of the VAT registration such as dividend payments (that do not pay our claim in full)
(Although there is provision on the V915 for making a manual repayment at part B4, it should not be used for this purpose. Manual repayments for insolvent traders are to be authorised on VAT 971.)
Authorisation levels for the VAT 915 are as follows:
O - up to £20k
HO - up to £50k
SO - up to £1m & all requests for redundant traders over £1500
G7 - unlimited
Completed VAT 915 forms are to be sent via Electronic Folder to the relevant Accounting Adjustment Unit on the 3rd Floor at Queens Dock. The relevant tray for the forms to be sent to is the 360 Index Tray.
