Flat rate scheme, are refunds not deduced from turnover?

Discussion in 'Accounts & Finance' started by dupy, Aug 6, 2019.

  1. dupy

    dupy UKBF Newcomer Free Member

    14 0
    Hello

    I assumed that customer returns/refunds would be deducted from turnover, otherwise you'd be paying VAT to taxman that you haven't received, or rather no longer have as full refund have been provided to customer. My accounting software is suggesting VAT still owned and doesn't take into account the refund.

    Are refunded not deductible? This would mean you'd be out of pocket with each and every refund. Is this the same on normal scheme?

    Thank you
     
    Posted: Aug 6, 2019 By: dupy Member since: Aug 5, 2013
    #1
  2. Scalloway

    Scalloway UKBF Legend Free Member

    15,048 3,189
    You are correct a refund reduces your VATable turnover. I would check the settings on your software.
     
    Posted: Aug 6, 2019 By: Scalloway Member since: Jun 6, 2010
    #2
  3. MyAccountantOnline

    MyAccountantOnline UKBF Legend Full Member

    12,700 2,354
    What software are you using?
     
    Posted: Aug 7, 2019 By: MyAccountantOnline Member since: Sep 24, 2008
    #3
  4. dupy

    dupy UKBF Newcomer Free Member

    14 0
    Hi Nicola - I'm using Pandle.

    Scalloway - makes sense doesn't it, but my software and support is saying otherwise... "You are set up on the Flat rate scheme in Pandle which means you dont reclaim VAT on purchases"

    Perhaps it is a settings issue, in the sense of how I processed the refund. I processed the refund in 'Refund' category. Pandle lumps this in as 'VAT on purchases' and therefore doesn't deduct this on flat rate scheme. Support suggests that I simply add the refund to the 'Sales' category in order not to pay vat on refunds. This works, but ideally I would have liked to have refunds as a separate figure so as I can easily keep an eye on refund amounts/percentages.

    Is this standard for accountancy software, or would a different app allow me to separate refunds but account for them according so as vat is not paid on them?
     
    Posted: Aug 7, 2019 By: dupy Member since: Aug 5, 2013
    #4
  5. MyAccountantOnline

    MyAccountantOnline UKBF Legend Full Member

    12,700 2,354
    Hi Dupy unfortunately I don't know Pandle well enough to help but my reason for asking was as you've just mentioned to see if the refunds need to be allocated somewhere specifically to ensure the VAT is calculated correctly.
     
    Posted: Aug 7, 2019 By: MyAccountantOnline Member since: Sep 24, 2008
    #5
  6. MyAccountantOnline

    MyAccountantOnline UKBF Legend Full Member

    12,700 2,354
    I would say generally most software/systems will require you to issue a credit note which is then deducted from the sale.

    If Pandle allows more than one sales category could you have one set up just for refunds - calling it something like 'sales refunded'?
     
    Posted: Aug 7, 2019 By: MyAccountantOnline Member since: Sep 24, 2008
    #6
  7. justintime

    justintime UKBF Regular Free Member

    500 66
    Set up a new category in the 400 range and call it refunds or sales refunded as Nicola suggests. It sounds like your current refunds is in an expense category, which is why it's not being picked up on the VAT.
     
    Posted: Aug 7, 2019 By: justintime Member since: Apr 12, 2009
    #7
  8. dupy

    dupy UKBF Newcomer Free Member

    14 0
    This is a great idea, thanks all!

    For some reason I always assumed that 'money in' had to go in a revenue category, and money out had to go in an expense category. Setting up 'Sales Refunded' as revenue category solves this problem thank you.
     
    Posted: Aug 8, 2019 By: dupy Member since: Aug 5, 2013
    #8
  9. TheCyclingProgrammer

    TheCyclingProgrammer UKBF Regular Free Member

    1,074 219
    That would explain it. Refunds are not expenses, they are a credit to your sales account (a reverse sale effectively).
     
    Posted: Aug 8, 2019 By: TheCyclingProgrammer Member since: Jul 15, 2014
    #9