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How to record a refund that didn't get paid ?

If a client owes HMRC VAT and in a quarter had a refund but that never got paid

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If a client owes VAT to HMRC and in a quarter had a refund, but that never got paid into the business bank account and HMRC just reduced what was owed, how do you record that in the "VAT Liability Account" on the software ?????

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By Leywood
10th Jun 2021 10:45

What? Dont understand the Q. What is so difficult? Just journal it/process the transaction as usual. Think about your double entry.

Or is there an issue with the software?

Telling us what software you are using might be a help.

Probably worth updating your bio. Do you now have your AAT levels 3 & 4?

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By David Ex
10th Jun 2021 10:44

Journal??

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By clint hammond
10th Jun 2021 10:54

If a client owes HMRC £10,000 and in a quarter had a refund of £2,000 which wasn't paid into the business account and HMRC just reduced the total owed from £10,000 to £8,000, how do you record that refund if it hasn't been paid into the business account ???

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Replying to clint hammond:
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By Leywood
10th Jun 2021 11:00

clint hammond wrote:

If a client owes HMRC £10,000 and in a quarter had a refund of £2,000 which wasn't paid into the business account and HMRC just reduced the total owed from £10,000 to £8,000, how do you record that refund if it hasn't been paid into the business account ???

Your liability account will have reduced.

So come on, make a bit of an effort. Write out (on here) your double entry.

2nd time of asking - what b...y software

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Replying to clint hammond:
By Duggimon
10th Jun 2021 11:11

You just don't record it, it's already correct.

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Replying to Duggimon:
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By Paul Crowley
10th Jun 2021 11:32

Agree
Do nothing
No bank entries

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By clint hammond
10th Jun 2021 11:22

Journal Memo to HMRC - Paid out

From Account: Business Bank Account
To Account: VAT Liability

Journal Memo to HMRC - Paid In

From Account: VAT Liability
To Account: Business Bank Account

but the refund hasn't been paid in .....

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Replying to clint hammond:
By Duggimon
10th Jun 2021 11:35

You recorded output VAT less than input VAT in the quarter, so your VAT liability account is sitting at, say, a debit of £2,000. You file the return, no money comes in, account still Dr £2000.

Then you do the next return where output VAT is £4,000 more than input VAT. Your liability account is at £2,000 credit.

File the return. HMRC deduct £2,000 from the bill of £4,000, you pay £2,000. The £2,000 goes to the liability account, which is now zero.

The refund is never posted anywhere because it was never refunded.

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Replying to clint hammond:
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By armstrongbell
10th Jun 2021 23:55

You started with "Journal Memo to HMRC - Paid out

From Account: Business Bank Account
To Account: VAT Liability"

Do those entries relate to the VAT that is unpaid? If so, how does your bank account reconcile?

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Replying to armstrongbell:
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By clint hammond
11th Jun 2021 06:55

All VAT sales and purchases goes in the "Vat Liability account" and when a payment is made out to HMRC for VAT it gets recorded and vice versa if paid in, so the bank gets reconciled after each month.....its solar easy bookkeeping accountancy software.

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Replying to clint hammond:
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By armstrongbell
11th Jun 2021 11:00

My point was that you said the VAT wasn't paid but then you used a journal that showed a bank payment.

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By clint hammond
10th Jun 2021 11:38

Many Thanks.

That makes sense.

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By Leywood
10th Jun 2021 12:12

TBH I dont think you should be offering services to the public with only level 2 AAT.

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Replying to Leywood:
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By clint hammond
10th Jun 2021 12:24

My oldest son is MAAT but away at the moment and a new limited company business started in April which is getting AAT license.

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Replying to clint hammond:
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By Leywood
10th Jun 2021 12:37

clint hammond wrote:

My oldest son is MAAT but away at the moment and a new limited company business started in April which is getting AAT license.

That of course could have waited until he returned. I would suggest you look to do your level 3, will help further with basic double entry, so you dont rely on the software. Doesnt matter what age you are and will only take a few months.

'IS' getting? I do hope you have MLR cover elsewhere.

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Replying to clint hammond:
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By Andy556
10th Jun 2021 13:08

+1 on the 'IS'. This is quite concerning as you're already trading.

Hopefully it's all done under JLH which I assume will have the correct licences, MLR and insurances as it's been going a few years

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By clint hammond
10th Jun 2021 13:47

ALL our clients go through another company that of course has MLR and insurance. JLH and BTB just invoice that company for services and both have business insurance. BTB only started in April and is in motion with the AAT to obtain licence. Things are in motion for BTB to have it's own clients in the near future.

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Replying to clint hammond:
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By Leywood
10th Jun 2021 14:49

clint hammond wrote:

ALL our clients go through another company that of course has MLR and insurance. JLH and BTB just invoice that company for services and both have business insurance. BTB only started in April and is in motion with the AAT to obtain licence. Things are in motion for BTB to have it's own clients in the near future.

So, you say that you have clients. Do you invoice said clients? Take payments for services provided in a bookkeeeping/Accounting capacity?

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Replying to Leywood:
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By clint hammond
11th Jun 2021 06:52

Not clients of JLH and BTB, only Invoice the other firm for services as written and not clients.

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By SXGuy
10th Jun 2021 14:59

Your accounting software would show the vat liability, when you ran the next vat period and there was a refund it would have reduced that liability. That's it. Nothing else to do. It's done. Move on.

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