Refunds/exchanges vs sales ?

[Janemorley74]

Hi there, i am a little bit stuck with regards the following scenario.

During lockdown i was only taking card payments. In certain situations i was refunding customers in cash or exchanges and issuing credit notes.

Do these refunds, credit notes minus off the total sales as it is no longer spent?

So if my cash book for the year was £90,000, but i had £1500 refunds and £4500 in credit notes given out from returns, then would my sales then be £84,000 ?

thanks
Jane

 

[Scott DLE]

The refunds would be minus total sales as it’s no longer a sale. It’s refunded!

Follow the money coming in and out. It doesn’t matter if you have given a credit note or not. Maybe your accountant might put it as a liability at the end of year- Not sure.

But if you have taken the cash and the customer doesn’t have the goods. Then in the future when they take the goods it’s not a new sale. As they have essentially already paid for the goods previously. Just they didn’t like-want that version or are still awaiting delivery.

Also I would never refund in cash from a card payment, you would have paid fees on the card transaction, so you should have refunded back to persons card and would have got fees back.

 

[kulture]

The refunds would be minus total sales as it’s no longer a sale. It’s refunded!

Follow the money coming in and out. It doesn’t matter if you have given a credit note or not. Maybe your accountant might put it as a liability at the end of year- Not sure.

But if you have taken the cash and the customer doesn’t have the goods. Then in the future when they take the goods it’s not a new sale. As they have essentially already paid for the goods previously. Just they didn’t like-want that version or are still awaiting delivery.

Also I would never refund in cash from a card payment, you would have paid fees on the card transaction, so you should have refunded back to persons card and would have got fees back.

Most credit card providers charge fees on refunds, but the real reason not to give a cash refund is to avoid a chargeback. An unscrupulous customer could pocket the cash and then get a chargeback due to your non delivery or whatever. A cash refund is not a defence they would accept

 

[DWS]

Is this to do with the VAT compliance check you mentioned in another post?
If so you should really be getting your accountant involved in this as they will know more about your business as well as what HMRC need in response to their letter.
Not saying this is the case but you may be bringing more attention to your business then needed, you say all your sales were by card but some refunds were in cash, HMRC may well want to know where the cash came from, exchanges are still sales.
When you submitted your original end of year accounts was the turnover from sales over the £85k threshold?

 

[Janemorley74]

Is this to do with the VAT compliance check you mentioned in another post?
If so you should really be getting your accountant involved in this as they will know more about your business as well as what HMRC need in response to their letter.
Not saying this is the case but you may be bringing more attention to your business then needed, you say all your sales were by card but some refunds were in cash, HMRC may well want to know where the cash came from, exchanges are still sales.
When you submitted your original end of year accounts was the turnover from sales over the £85k threshold?

Yes still ploughing through the investigation. I am in contact with my accountant and have a meeting booked. This is just me wanting to make sure I have not worked anything out wrong, I don't want to have penalty's unless I have actually honestly make a mistake.

 

[Janemorley74]

The refunds would be minus total sales as it’s no longer a sale. It’s refunded!

Follow the money coming in and out. It doesn’t matter if you have given a credit note or not. Maybe your accountant might put it as a liability at the end of year- Not sure.

But if you have taken the cash and the customer doesn’t have the goods. Then in the future when they take the goods it’s not a new sale. As they have essentially already paid for the goods previously. Just they didn’t like-want that version or are still awaiting delivery.

Also I would never refund in cash from a card payment, you would have paid fees on the card transaction, so you should have refunded back to persons card and would have got fees back.

thank you, so would a credit note be classes as refund? - until its been re spent?