Sales Tax/Vat refund from Government

[John Whitmore]

I agree with all you've said and I understand that VAT/Sales Tax is not my
money, I'm collecting it for somebody else. And I 100% agree that it's a
liability account, I'm just struggling with refunds. My Problem is that if at a point
in time, say today, I have built up a Liability of 100 in my VAT account and I
get a refund of 50 tomorrow, because last month I did nothing but purchase
supplies, and pay VAT on those supplies, to the tune of 50.

Given that scenario tomorrow with the 50 credited to my account by the
government going into the Liability account I now owe 150. That sort of feels
wrong. 

On one level it makes sense, and it's beginning to work it's way through to
the grey matter.

Hold on if I've not done anything for months but pay vat on supplies then my
Liability account could end up with a balance of -50, then when I get the
refund the account goes to zero. OK that makes sense, it's my previous example
that feels wrong.

Right I agree with the accountant, tentively. ;-)

Thanks for your help, rubber ducking.



On Fri, Feb 03, 2017 at 03:09:26PM +0000, Maf. King wrote:
> As an addendum - your VAT Paid & VAT Due accounts should both head to zero 
> every time you do a VAT return.  Of course, they may not get there because of  
> the time lag between end-of-quarter and actually doing the return, but they 
> certainly shouldn't be ever-increasing.
> 
> I'm speaking about the UK, by the way! YMMV elsewhere in the world...
> 
> Maf.
> 
> 
> On Friday, 3 February 2017 13:40:23 GMT John Whitmore wrote:
> > I really thought I had my head around Sales Tax, VAT where I am, but my
> > accountant threw a spanner in the works, earlier today.
> > 
> > He saw that I had an Income account for Vat refunds and said that that was
> > wrong as I'd get taxed on an Income and it's not. He said that the refund
> > from Government should go into the Liabilities:VAT account, which I think
> > is totally wrong as well.
> > 
> > So I think that VAT Refunds should go somewhere else. Maybe an asset
> > account?
> > 
> > My Problem with getting a refund and applying that to a Liability account
> > means that my laibility is increasing, that's not correct at all.
> > 
> > Man accounting is simple algebra but it don't half get complicated.
> > 
> > Cheers for any thoughts on the matter.
> > 
> > John
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