Mark,

How would i account for a Tax rebate within Solar Accounts please?

Would like to add that having used Solar Accounts for a couple of months now how much easier to use than my previous software package it is.

Regards

Alan

Hi Alan - glad you like the software!

To record a tax rebate, click menu File > New > Money Received.

Enter 'HM Revenue and Customs' as the payee, and allocate to the 'Income Tax and NI Liability' account (or the 'Coporation Tax Liability' or 'VAT Liability' account, depending on the type of tax). Also the VAT Treatment should be 'Out of Scope'.

Note: for your accounts to agree with HMRC, your tax liability account must be negative at the end of the tax period. For example if you are due £412 as an income tax refund for the period ending July 2009, the balance of your 'Income Tax and NI Liability' account should be -£412 as at 31 July 2009. (You can configure the Balance Sheet report to show the balance of an account on a particular date).

Regards,

Mark,

The scenario you describe would occur if the Tax rebate was received after the tax year has ended?

My position is that I have been on Basic Rate tax for most of this (tax) year but will be getting my P45 soon which means that I will probably get a tax rebate mid-year. In this case, the Income Tax and NI Liability account will (possibly) equal £0.00 or some negative value that will not necessarily equal the amount of the rebate?

Hi Alan,

Yes, the scenario I described was where the rebate is received after the tax year has ended.

You may need to record an adjustment so that the tax liability account matches your refund amount. To do this, click File > New > General Transaction. From Account: Tax Expense; To Account: Income Tax and NI Liability.

I hope this helps - let me know if you need more information.

Regards,

As a self employed trader would I allocate a tax rebate to the Owner's Capital/Owner's Drawings account? I was under the impression that the Income Tax and NI Liabiity account was not used in my situation.

The rebate is for the tax year prior to my first financial year using Solar.

Hi Robert,

Since you are self-employed your tax payments and refunds are not considered part of your business. If the refund was paid into your personal bank account then you don't need to record it in Solar Accounts.

Regards,

Thank you for answering so quickly Mark.

The refund was actually paid back into my business account (the account from which I had made previous payments of Income Tax), so I guess I need to account for it somehow.

By the way, your software is much easier to use than others I have tried. Keep up the good work!

Hi Robert,

In that case you would treat it as an injection of capital into the business - create a General Transaction from the 'Owners Drawings and Personal Use' account to the 'Cheque Account'.

And am glad to hear you like Solar Accounts!

Cheers,