VAT refund question

[Anara]

I've just received my reg certificate and the first return is due in June. As the website is still in design we are only making sales on eBay. Due to this I can see that we will be getting a VAT refund as the input VAT is a lot more than the output.

As I'm a sole trader (and I've assumed that the refund process works the same as the tax refund process) can I put my personal bank account details down or do I need to put the business account details? I thought that as a sole trader *is* the business then any refund belongs to me, but someone told me that wasn't right.

God I'm so long winded - sorry!

TIA

 

[bwglaw]

If you are using a business bank account for your business activities including outgoings I would think it is essential to use the same account for VAT refunds so that you can account for the income later. I believe that if you put the VAT refund into your personal account this might be classed as taxable income.

It is good practice to ensure all business activities are in one account to make your tax returns etc easier

I am not an accountant but there are a few on here i.e. Alpha, Joyous who will be able to give specific advice

 

[creacom]

Hi Tia

Just incase you dont find the answer here or you have any other questions I would call the HM Customs and Excise on 0845 010 9000.

The people on the phones ( maybe not the inspectors :wink: ) are very helpful and when I had a million and 1 questions they explained everything and sent me out lots of into on the subject.

For once a friendly Government helpline !

Best of luck with it all

Jacqui

 

[Joyous]

Hi Anara

If you have a separate business account then you should provide those account details for the receipt of your VAT refunds. For one thing it makes the accounting much more straightforward. Secondly if the money is credited to your personal account and stays there then they are effectively drawings, i.e. cash that you have withdrawn from your business.

Regarding your sales on eBay – don’t forget that you’ll need to account for VAT on these as well.

Regards

Joy

 

[Anara]

Thanks for the replies everyone.

Joy - so the money effectively belongs to the business then?

Does that mean I am not allowed to withdraw the refund from the buisness account into my personal funds even though so far all the money used to buy stock etc has come from personal funds rather than income generated by sales?

If I am allowed to withdraw the refund then how would I account for this in quickbooks? How/where would I should the receipt of the refund and then the withdrawal? Do I need to declare it on my Tax return next year? I'm still in PAYE employment as well as runnning the business if that makes a difference.

Many thanks for the help and sorry for all the questions.

Claire

 

[Joyous]

Joy - so the money effectively belongs to the business then?

Yes

Does that mean I am not allowed to withdraw the refund from the buisness account into my personal funds even though so far all the money used to buy stock etc has come from personal funds rather than income generated by sales?

Certainly you’re allowed to withdraw it as long as you account for it as drawings. Likewise, all the personal funds that you have used to buy stock should be accounted for as capital introduced.

If I am allowed to withdraw the refund then how would I account for this in quickbooks? How/where would I should the receipt of the refund and then the withdrawal?

You should have a VAT control account set up to represent the amount that owed to/by HMRC. VAT payments, refunds should be posted here with the other side going to “bank”. If you subsequently withdraw the funds then it’s credit “bank” and debit “drawings”.

Do I need to declare it on my Tax return next year?

No you don’t need to declare it on your tax return as it’s not taxable income. Just make sure that when you draw up your accounts all your receipts and payments are net of VAT, i.e. the VAT is not included.

I'm still in PAYE employment as well as runnning the business if that makes a difference.?

It makes no difference. As an aside though, if you make a loss from your self employment you could get a refund of the PAYE that you’ve paid through your employment.

Many thanks for the help and sorry for all the questions.

No probs.

Regards

Joy

 

[amcphillips]

Just to hijack the thread slightly......how quickly can you get a VAT refund?

I'm going to be buying something with about £5-7k of VAT on it and would like it back asap to ease cashflow!!!! Is it a case of you can submit it when you like? By the way I haven't registered for VAT yet thats why I'm asking before I do!

 

[Joyous]

From experience VAT refunds normally arrive within 7 working days of you submitting your VAT return. You cannot submit a claim whenever you like. The claim forms part of your quarterly submission

Registering for VAT is another matter. VAT registration is supposed to take 15 working days, however I am still waiting on a VAT number for a client that I registered mid March. Others apparently have similar horror stories to tell.

Regards

Joy

 

[amcphillips]

In that case, can I register for VAT now and buy something just before my first return and then receive a refund quite quickly?

 

[KM-Tiger]

In that case, can I register for VAT now and buy something just before my first return and then receive a refund quite quickly?

Yes, you can, I did this when I bought a building and had to borrow £100K to pay the VAT, but got it back about 2 weeks later. It was a while ago, but scary at the time!

IIRC you have some choice when you register as to when your quarter ends will be, or if not you can apply to change after you have registered. That way you can minimise the time between purchase and refund.

 

[dcaccounting]

From experience VAT refunds normally arrive within 7 working days of you submitting your VAT return. You cannot submit a claim whenever you like. The claim forms part of your quarterly submission

Registering for VAT is another matter. VAT registration is supposed to take 15 working days, however I am still waiting on a VAT number for a client that I registered mid March. Others apparently have similar horror stories to tell.

Regards

Joy

I agree, my client had to wait 6 weeks for there registration.

Regards

Dean

 

[Faith28]

You can reclaim back the VAT for up to 3 years.

So if you bought your computer, say within 3 years before registering then you should be able to claim back the VAT on it as long as you are using it for business purposes.

 

[dcaccounting]

Be carefull when claiming upto "3 years".

This rule is only for capital assets that you still have when making the claim and you must still have the proof of input vat i.e the receipt.

You can also claim the last 3 months on general revenue expenses.

Regards

Dean