Forum Message

Import VAT and duty

Hi.

Earlier this year I imported some equipment from the USA that was used for a trade show, the equipment was exported back to the States on completion. For the kit to come in I had to pay a surety of £1546.21 (£1078.41 VAT + £467.80 duty) + a handling fee of £38.66. The total amount of £1584.87 was paid using a personal credit card, as I was led to believe that the money would be refunded to the card.
I’m now trying to reclaim the above and have been told that:

The £1078.41 VAT needs to be reclaimed through my VAT return
using Form C79 as proof of payment;

The £467.80 duty is being reclaimed and will be repaid using
a cheque, this I guess will be made out to the company;

My question is how should I show the initial payment of £1078.41 VAT, £467.80 duty and the (eventual) repayment of £467.80 in Solar Accounts? Also will it take the above into account when calculating the VAT return or will I need to make a manual adjustment?

The handling fee of £38.66, I assume I could allocate that as an Uncategorised Expense from the Owners drawings and personal Use account. Could the VAT and Duty be allocated in the same way?

Thanks for the help.

Regards

Adrian


Posted by Adrian Phillips on Jul 1, 2011 10:38 AM BST

Hi Adrian,

Yes, it's fine to allocate the handling fee to 'Uncategorised Expenses'. However, you should not record the VAT and duty payments as an expense (because you expect to get the money back). Instead, do the following:

For the VAT payment, create a Money Paid Out transaction paid from the 'Owners Drawings and Personal Use' account with two lines in the Allocate to Account table:
Line 1: Balancing Account, VAT rate of 20%, Amount £6,470.46
Line 2: Balancing Account, VAT rate of 0%, Amount -£5,392.05 (ie. a negative amount)
This will transaction will add £1,078.41 to the Box 4 figure on your VAT return automatically. You should check with HMRC to see if Box 7 should be affected by this payment - if so, you will need to adjust this box manually.

For the duty, create a new asset account called 'Duty to be refunded'. To record the payment, create a Money Paid Out transaction from the 'Owners Drawings and Personal Use' account to the 'Duty to be refunded' account. When you receive the refund, record the opposite transaction (ie. a Money Received transaction from the 'Duty to be refunded' account to the 'Owners Drawings and Personal Use' account). For both these transactions the VAT treatment should be 'Out of Scope'.

Regards


Posted by Mark McLaren (Solar Accounts) on Jul 1, 2011 3:42 PM BST