Sales Tax/Vat refund from Government

Maf. King maf at chilwell.net
Fri Feb 3 10:57:07 EST 2017


On Friday, 3 February 2017 15:35:28 GMT John Whitmore wrote:
> 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.

Hi,

I think it might depend a bit how you've got your tree set up.

Ive got 
VAT (liability, placeholder)
VAT:Box1 (liabiality, VAT i've charged my customers, or Output Tax)
VAT:Box4 (asset, VAT i[ve paid my suppliers, AKA Input Tax)
(and some others)

so if I have a quarter where I've charged £100 and bought £60, then the parent 
shows a liability of £40  My VAT payment transaction would look like 

(from bank account, as I've just done it today...)
Vat:Box1 100   -
Bank:current:	-   40
VAT:box4	-	60

and at the end, both VAT accounts go to zero and the parent liability = 0

If I was due a refund, because I'd charged £20 and bought £60, then the VAT 
refund would be
VAT:Box1	20	-	
Bank:currnt	40	-
VATBox4 	-	60

(i think)  Bank would be up £40, Box1 and Box 4 both reduce to 0

If you're putting both Inputs & Outputs in one account, I can see how it makes 
everything more opaque..

HTH
Maf.



> 
> Right I agree with the accountant, tentively. ;-)
> 
> Thanks for your help, rubber ducking.



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