Humans are not machines and we can have a tendency to post things to different VAT rates depending on what day of the week it is and what the weather is doing. It happens.

When it does Hindsight will find it for you and then you can decide on the action that needs to be taken.

In the instance below we can see that we posted an invoice for Bayside Club to with 20% (VAT on Income) which is correct and then the next one to Exempt Expenses and 20% (VAT on Income) – which may have been correct.  However, on investigation the second invoice was incorrect as we have applied a purchases VAT rate to a sales invoice which might make it difficult to reconcile our turnover to the VAT return and the same VAT was applicable to the Exempt item as it was for delivery charges where we were contracted to provide the service.  The transaction has been edited in Xero and we hit complete to let Hindsight know that all is well.

What we should now be doing is looking into who posted the transaction in that fashion and update them on the VAT rules that apply to postage and delivery so we apply the correct VAT treatment. VAT Notice 700/24.