XBert Type: Standard
Accounting Software: Xero, QuickBooks Online
Country Restriction: United Kingdom only
Risk Type: Tax Risk
Business Function: General Ledger
Overview
This XBert checks for a manual journal posted on or close to a VAT period boundary that adjusts the VAT control account directly. This may be a legitimate correction, but it can also be a balancing entry keyed straight into the VAT position to make the return tie, rather than correcting the underlying transactions. Catching it lets you confirm whether the adjustment traces back to real activity before you file.
What it does
It looks for a posted manual journal dated on or close to a VAT period boundary that adjusts the VAT control, liability or clearing account directly. This is the classic 'plug' - an amount keyed straight into the VAT position to make the return tie, rather than correcting the underlying transactions. Under Making Tax Digital, every figure on the VAT return must trace back to a digital transaction, so a balancing journal breaks that digital audit trail because the adjusted figure no longer ties to the records behind it. The alert shows the journal number, the date it was posted, the period boundary it sits near and the amount it moves through the VAT control account.
How it works
XBert looks for posted manual journals in GB files dated on or within a few days of a month-end or quarter-end. The alert is raised when:
the journal is a posted manual journal in a GB file;
it is dated on or within a few days of a month-end or quarter-end; and
a line on the journal adjusts a VAT or GST control, liability or clearing account by more than the materiality threshold.
It raises a higher priority where the amount is a round sum or the narration is thin, because round-sum or thinly narrated entries are the most likely plugs.
Example/Use Case
Priya, a bookkeeper at Northgate Books, is finalising the quarterly VAT return for her client Maple Joinery Ltd. The return is out by a few hundred pounds and the deadline is close, so rather than chase the difference she posts a round manual journal straight to the VAT Control account on the last day of the quarter to make it tie. The return is filed and balances. Three months later HMRC opens a check and asks how the VAT figure was reached. The journal does not trace to any invoice or bill, so Priya has to unpick the whole quarter to find that a supplier bill had been entered twice. Had she investigated the difference at the time, she would have found the duplicate in minutes instead of rebuilding the quarter under audit pressure.
Accounting software
This XBert runs on manual journals from Xero and QuickBooks Online.
Which countries it supports
This XBert applies to the United Kingdom only. It uses VAT period boundaries and Making Tax Digital rules specific to the UK.
Processes
This alert sits within your general ledger and VAT processes and helps ensure the VAT return ties back to your underlying records. To resolve it:
Select RESOLVE NOW to open the manual journals area in Xero and review the flagged journal.
Confirm whether the adjustment to the VAT control account corrects a genuine, identifiable transaction or simply balances the return.
If it is a plug, reverse it and fix the underlying transactions so the VAT return ties to the records, for example by correcting a miscoded transaction, removing a duplicate or making a missed adjustment.
If it is a valid correction, note the explanation so it traces back to real activity and the figure can be shown to HMRC if asked.
Check that the VAT return no longer relies on a balancing entry, so the digital audit trail required under Making Tax Digital is intact and the return submitted to HMRC is correct.
Once the journal has been reviewed and any underlying error corrected, mark the XBert as resolved.