I regularly receive vat refunds as i sell mostly zero rated goods but have lots of vatable expenses. hoe do i record the refund which is usually paid direct into my bank account
Hi Conrad,
To record a VAT refund from HMRC create a Money Received transaction from the 'VAT Liability' account to the 'Cheque Account'. The Received From field should be 'HM Revenue and Customs' and the VAT Treatment field should be 'Out of Scope'
Regards,
Having just had a refund I folowed this instruction - this increses my Vat liability which is surely not correct?
Hi Simon,
Yes I know it seems odd, but a VAT refund from HMRC should increase the VAT Liability account.
Keep in mind that the VAT Liability balance represents the VAT money you owe to HMRC, and consider this example:
At the end of February your VAT Liability balance was -£73.80. Note this is a negative figure, meaning that HMRC owed you £73.80.
On 5 March you invoiced a customer £1,000 plus £200 VAT. The net amount you owe to HMRC is now £200 - £73.80 = £126.20, so your VAT liability balance is now £126.20.
On 8 March you received the refund payment from HMRC for £73.80. The amount you owe to HMRC is now £200, so your new VAT Liability balance is £200.
Note that in step 3 your VAT liability balance was increased.
Regards,
