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£250 on-line filing refund

Was just wondering where the best place to post the double entry of the on-line filing refund deducted from the latest PAYE payment.
Obviously I credit the PAYE control account, but where is the best place to post the debit?



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Thanks to everyone who responded, a useful and varied response as always.


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I have also been posting
to a separate income code so it stands out.

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it's tax free ...... it's probably best to post to an identifiable "other income" account to ensure you don't forget to exclude it from the tax computation !

In any event, it represents a Goverment incentive, so should most appropriately be posted to other income anyway.

(gross wages have not been reduced as such - that is just the method Govt have chosen to pay the incentive).

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Sorry, I did of course mean DEBIT the PAYE account as it is reducing the liability.

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Wages & salaries?
I have credited wages & salaries in accounts which I have prepared as I believe it is a reduction of PAYE liability.

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bernard, take care.....
....when running your company that you recognise the distinction between the company as a legal person and you as a legal person. Else you might inadvertently fall into some nasty tax traps.

The incentive is most certainly NOT "your money to use as you wish" if the employer is a company. The incentive belongs to the company, not the company owner, and should most definitely NOT be credited to your director's account.

As Stephen notes, it will not affect the company's CT bill, but would mean the accounts are "wrong" (albeit not material, I am sure), and would affect your personal tax bill if you are higher rate tax payer.

(Note, it's true that if Rich is discussing a sole trader, he could adopt the short cut approach of crediting his own account (as there is of course no legal distinction between the person and the trader and the money is not taxable), but I would not recommend it.)

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On-line filing incentive
It's your money to use as you wish. Depending on how you have your accounts laid out why not put in your "current account" or "loan account" on the balance sheet. Then you can be sure not to get it caught up in the P&L and accidently pay tax on it as income. For example I work inside a limited company and often pay expenses out of my own pocket and show these in my "director's current account" and reclaim the money as I need it.

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Bernard, not sure I agree with you.....
.... When you pay expenses out of your own pocket, the double entry would be to:

Dr P&L (in the appropriate expense category)
Cr Loan Account (to show money is owed to you)

With the filing incentive, you would:

Dr Bank (or PAYE Creditor)
Cr P&L

The incentive must be shown as income, even if it is not taxable. I agree with other respondents that it should go to an "Other Income" account.

If you credited the Directors Loan Account, you'd be effectively taking the money out tax free (OK, the company doesn't pay tax on it but, if distributed to an individual, then that individual does pay tax).

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Remember it is tax free
I would post it to a separate account, just so you remember to deduct it in your tax computations as a tax free incentive. If you just post it as a credit to wages it will get lost by the time you come round to doing tax comps and you may end up paying His Tonyness more than he deserves!!

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