Hi, it's a bit long-winded!

I have just received a refund from HMRC for Employer's and Employee's NI contributions, let's say £100 and £200 respectively. I knew this was coming and created a Purchase Credit note for the amounts, against the 'Income Tax and NI Liability' account.

I did a 'Receive Refund' action against the Purchase Credit note, and this showed as a positive balance of £300 in the 'Income Tax and NI Liability' account.

I then created a 'Money Paid Out' transaction, with the £200 paid to me, as the employee, from the 'Cheque Account.' Again, the account is set to 'Income Tax and NI Liability'.

The 'Income Tax and NI Liability' account is now showing a positive balance of £100 (the employer's refund)

Is this correct or should this have been transferred into another account? The balance of the account is usually zero as I pay HMRC every month - it now appears like I owe that £100 to HMRC.

Hi Matt,

If you received a refund from HMRC then it means that you previously paid them too much money. This means that before you received the payment the balance of the 'Income Tax and NI Liability' account should have been -£100, not zero.

Search for the date of the original employee payment which used the wrong NI figures. If this date is in a previous financial year or before you started using Solar Accounts then reduce the opening balance of the 'Income Tax and NI Liability' account by £100. Otherwise create a General Transaction on that date from the 'Employee Costs' account to the 'Income Tax and NI Liability' account for £100.

Regards,

Thanks Mark,

The figures are correct if the salary is taken over a year; however, we took on our current payroll clerk middway through the year and my salary had changed so there was some confusion but no way to know where the 'wrong' figures were used.

This means we'll either have to set the balance to -£100 or use the General Transaction.

I'm leaning towards the General Transaction option but I'm not sure what this will actually do - won't it create a negative balance in the Employee Costs account? Otherwise I'll just fall back to the other option.

Thanks,

Matt

Hi Matt,

Yes, if you record the General Transaction then it's possible that the Employee Costs balance will be negative. Unfortunately I cannot say whether this would be a problem in your case as your situation is too complicated for us to provide advice on. I recommend you check with your accountant about how to best record the adjustment to the 'Income Tax and NI Liability' account.

Regards,