I have read the other queries on the forum in relation to the Vat refund and want to check if you think that my situation is the same.
You may recall I recently sent you a message about me using the General Transactions incorrectly and not realising that these were not included in the VAT return? Well this situation has been sorted now and HMRC have accepted my findings and issued us with a lovely refund, but I cant work out how to record it.
Doing the method as described increases my Current Account (Asset) which is correct, but it also increases the Vat Liability Account (Liability) which I am not sure if correct in my case, although I maybe wrong.
In my situation, the contents of the vat liability account were correct, it was just the amount that I was putting into the VAT returns that was wrong, so I don't really want this refund to affect the contents of this account at all.
Would it be right to do a general transaction from account Tax Free Income (or some other income account) and To The Current Account?
Thanks as always.
Hi Kim,
I believe that a VAT refund should always increase the balance of the VAT Liability account. If the resulting VAT Liability balance does not correctly reflect the actual amount you owe to HMRC then most likely you have not correctly recorded earlier transactions. Check that your original VAT payment to HMRC reduces the VAT Liability balance by the amount you actually paid, not the amount you should have paid. If that doesn't help, you may want to ask your accountant to check all the VAT Liability transactions.
Regards,
