PayPal/Nochex & V.A.T

[MrGBoy]

I need some help..

I use PayPal and now Nochex - I've also just registered for V.A.T. If I charge £20 for my product, Nochex will take £1 per transaction. Where do I add the v.a.t. on? I only get £19 - the other £1 does not enter my bank account.


I'm confused...

 

[Maslins]

You add VAT onto the £20. Your fee to Nochex is simply a cost like any other for your business. If the Nochex fee has VAT on it then you can reclaim that.

 

[RAL]

I need some help..

I use PayPal and now Nochex - I've also just registered for V.A.T. If I charge £20 for my product, Nochex will take £1 per transaction. Where do I add the v.a.t. on? I only get £19 - the other £1 does not enter my bank account.


I'm confused...

There are two ways to account for vat.

• Pass vat element onto customers. Means you have increase the price of the product by vat rate of 15%. For example net price is £20.00 + vat £3.00 = £23.00 customers pays or cost to customer. This way you maintained your profitability but your product will be expensive for non-vat register customer.
• You suffer vat element. Means you pay vat from your selling price. The selling price of £20.00 would be vat inclusive price. To account for vat you extract the vat element from £20.00 by multiplying 15 dividing by 115 (£20x15/115) = £2.61 vat elements. So your sale price/income would fall by £2.61 to £17.39. So net price £17.39 + vat £2.61 = £20.00. But on the same time you can claim vat on purchase of the product, services and expenses.

The transaction fees you pay to Paypal/Nochex are separate to your sales. Deduction of fees from payment received is norm. The transaction fees is a cost to you so you have to enter £1.00 onto your expense account i.e. bank charges/credit card charges etc.

HTH

 

[MrGBoy]

There are two ways to account for vat.

• Pass vat element onto customers. Means you have increase the price of the product by vat rate of 15%. For example net price is £20.00 + vat £3.00 = £23.00 customers pays or cost to customer. This way you maintained your profitability but your product will be expensive for non-vat register customer.
• You suffer vat element. Means you pay vat from your selling price. The selling price of £20.00 would be vat inclusive price. To account for vat you extract the vat element from £20.00 by multiplying 15 dividing by 115 (£20x15/115) = £2.61 vat elements. So your sale price/income would fall by £2.61 to £17.39. So net price £17.39 + vat £2.61 = £20.00. But on the same time you can claim vat on purchase of the product, services and expenses.

The transaction fees you pay to Paypal/Nochex are separate to your sales. Deduction of fees from payment received is norm. The transaction fees is a cost to you so you have to enter £1.00 onto your expense account i.e. bank charges/credit card charges etc.

HTH

Hi

Thanks for this, but I don't have invoices for the amounts taken by Nochex, moreover, the amount taken by Nochex does not enter my account.

How would this work?

 

[Fernhurst Solutions Ltd]

MrGBoy ... you know the amount you sold the product/service for - you can see how much has come into your account after Nochex have taken their 'cut', so in theory you can see how much they have taken. It might take a bit of time, and I've never used Nochex, but there you go.

 

[RAL]

Hi

Thanks for this, but I don't have invoices for the amounts taken by Nochex, moreover, the amount taken by Nochex does not enter my account.

How would this work?

I presume that you have some kind of online system where you can see how many products at what price you sold. Based on this information you can work out your sales. This is the amount is inclusive of vat. So you need to work out vat as per my previous post.

Now coming back to Nochex charge, you need to speak to them, they should give you a statement or something which should show sales as above and their commission/charges.

What do you mean by Nochex charge do not enter into your account? Do you mean bank account or entering as bank charges into the ledgers?

 

[MrGBoy]

If I charge £20 - I get £19 after Nochex take their cut. The £1 that goes to Nochex does not enter my bank account, at any point. I physically receive £19 in my bank account. If I then deduct the V.A.T - and I claim expenses for the £1 - my accounts will not make sense - because I will be claiming £1 from the £19 when in fact the £1 comes from the £20 which does not enter my account.

 

[RAL]

If I charge £20 - I get £19 after Nochex take their cut. The £1 that goes to Nochex does not enter my bank account, at any point. I physically receive £19 in my bank account. If I then deduct the V.A.T - and I claim expenses for the £1 - my accounts will not make sense - because I will be claiming £1 from the £19 when in fact the £1 comes from the £20 which does not enter my account.

As I said in my previous post, you have to account for vat on your selling price not the net amount you received after deduction of bank charges.

So if you sell it £20.00, then VAT would be £2.61 and your net sale would be £17.39.

In nominal ledgers term

Credit Sales £17.39
Credit VAT £2.61
Debit Bank £20.00

As Nochex is taking £1.00 for processing the transaction so need to do a journal as follows

Debit Bank charges A/c £1.00
Credit Bank Account £1.00 This would be the same bank account as above.
So you would be left with £19.00 in cash and £17.39 in sales, £2.61 in vat and £1.00 as bank expenses.

Even though the Nochex charges/fees do not enter your bank account, however you incurred the cost and Nochex has in effect done a contra contra entry. You have to account for commission/bank charges separately.