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Julie Keen
Level 1

How to I record the payment received from HMRC for Furlough Employees ?

We have received our payment from HMRC for our furloughed employees - how do we record this in QB

Solved
Best answer April 28, 2020

Accepted Solutions
JackS
Moderator

How to I record the payment received from HMRC for Furlough Employees ?

Hi @Julie Keen  

 

You will have to create an equity account, select accounting > chart of accounts > new > account type Equity > account detail > Prepaid capital or surplus > Give the account a mane e.g. Furlough > save and close > create a bank deposit > select New+ > bank deposit > ensure the bank account that you received the amount in to is selected in the account field and the corresponding date when the amount was credited in the date field > in the account column within the 'add funds to this deposit' select the equity account you set up above > you can if you wish enter HMRC in the received from column > enter the amount received in the amount column > save and close. We have however also seen the Furlough amount being classed as income, you would therefore select accounting > chart of accounts > new > in the account Type field select Income > in the detail type select discounts/Refunds Given > name the account > save and close.

 

As above create the bank deposit however in the account column within the 'Add funds to this deposit' section select the income account you have just created. We must make you aware that we are not trained accountants and anything advise you should be qualified by an accountant.

View solution in original post

17 REPLIES 17
JackS
Moderator

How to I record the payment received from HMRC for Furlough Employees ?

Hi @Julie Keen  

 

You will have to create an equity account, select accounting > chart of accounts > new > account type Equity > account detail > Prepaid capital or surplus > Give the account a mane e.g. Furlough > save and close > create a bank deposit > select New+ > bank deposit > ensure the bank account that you received the amount in to is selected in the account field and the corresponding date when the amount was credited in the date field > in the account column within the 'add funds to this deposit' select the equity account you set up above > you can if you wish enter HMRC in the received from column > enter the amount received in the amount column > save and close. We have however also seen the Furlough amount being classed as income, you would therefore select accounting > chart of accounts > new > in the account Type field select Income > in the detail type select discounts/Refunds Given > name the account > save and close.

 

As above create the bank deposit however in the account column within the 'Add funds to this deposit' section select the income account you have just created. We must make you aware that we are not trained accountants and anything advise you should be qualified by an accountant.

View solution in original post

Julie Keen
Level 1

How to I record the payment received from HMRC for Furlough Employees ?

Thank you JackS

JBR80
Level 2

How to I record the payment received from HMRC for Furlough Employees ?

The Government Job Retention Scheme income is taxable, so I don't think an equity account is correct. I believe it should be income.

Gavin Jones Electrical
Level 2

How to I record the payment received from HMRC for Furlough Employees ?

My understanding was the furlough payment is taxable and therefore should be recorded as a sale/income. 

Serena76
Level 2

How to I record the payment received from HMRC for Furlough Employees ?

My accountant has advised it should be classed as income.

Please could you advise which vat tax code to use when adding the bank deposit?

 

Thanks

John C
QuickBooks Team

How to I record the payment received from HMRC for Furlough Employees ?

Hi Serena76

 

We have seen different accountants class the refund as equity and income. VAT and PAYE are separate taxation methods and VAT should not be recorded against the amount you receive as it has already been subjected to PAYE. You can record this transaction using the No VAT code.

We must make you aware that we are not accountants and any advise we give should be qualified by an accountant or HMRC.

Serena76
Level 2

How to I record the payment received from HMRC for Furlough Employees ?

Thank you.

 

Do I Use NO vat sales or purchases please?

John C
QuickBooks Team

How to I record the payment received from HMRC for Furlough Employees ?

Hi Seena

 

No VAT sales.

MiguelLuis
Level 1

How to I record the payment received from HMRC for Furlough Employees ?

So after reading through this - I have created an Income account and used sub section "other primary income" as its the only one that fits the bill after reading through various descriptions and ignored the vat classification.

 

Is this correct?

Jen_D
Moderator

How to I record the payment received from HMRC for Furlough Employees ?

You're doing it right, @MiguelLuis,

 

We record the money received from the claim as income in QuickBooks Online. Then, the VAT code to use would be NO VAT since this is classified as a refund from HMRC after processing your wage expenses. Let me outline the steps for you.

 

To add the income account:

  1. From the Accounting menu then pick Chart of Accounts.
  2. Use the New button.
  3. Choose Income from the Account Type ▼ drop-down.
  4. Pick a Detail Type from the list.
  5. Fill in the Name then Save and close.

 

To deposit the claim:

  1. Tap the + New button, and select Bank Deposit.
  2. Enter the account where the claim is to be deposited in the Account field.
  3. Update the Date field.
  4. Add the income account in the Account column.
  5. Enter HMRC in the Received From column to indicate where the fund came from.
  6. Add the Amount, then press Save and close when done.

You may also refer to JackS' recommended answer in his previous post.

 

Let me know if there are other things I can help you in QuickBooks. I'm always here to help. Have a good one.

KG Accountants
Level 1

How to I record the payment received from HMRC for Furlough Employees ?

Sheish
Level 1

How to I record the payment received from HMRC for Furlough Employees ?

Hi, I’ve just sorted a loan that we’ve received and did a journal entry to move it to the bank account so as it can be used. Would I do a similar thing with furlough money so as we can then pay directors? We don’t do payroll as such we pay dividends and then the accountant does the rest...

GeorgiaC
QuickBooks Team

How to I record the payment received from HMRC for Furlough Employees ?

Hi Sheish, 

 

Yes you'll be able to use a journal entry to record the furlough money depositing into the bank account and respective chart of account which you're using to track this.

 

You can then record paying this to the directors using an expense transaction, selecting the bank account under the payment account and the chart of account under 'category'.

 

Get back to us below if you have any Q's 🙂

Alyson Taylor
Level 1

How to I record the payment received from HMRC for Furlough Employees ?

This is incorrect, furlough money received has to be classed as income and appear in the profit and loss account. Not equity. It should be classed as other income not netted off against payroll expense.

 

This was advised by my accountant.

KG Accountants
Level 1

How to I record the payment received from HMRC for Furlough Employees ?

Furlough should definitely not be in equity. It should be under other income. Reason being,  it is not part of normal trading income.  It should not be under payroll costs. 

 

 

legalnumbers
Level 2

How to I record the payment received from HMRC for Furlough Employees ?

How do I do this for desktop. I followed the above more or less but there's nowhere to enter a VAT code.

 

Thanks

 

(BTW is there a way to search the community for replies for desktop users only?)

Angelyn_T
QuickBooks Team

How to I record the payment received from HMRC for Furlough Employees ?

I'll help you with setting up VAT codes in QuickBooks Desktop (QBDT), @legalnumbers.

 

In QBDT, you can create a new item to set up your VAT Codes. I'll guide you how.

 

  1. Open your QBDT file.
  2. Go to the Lists menu, then click on Item List.
  3. Click on New, then select VAT Item as type.
  4. Enter the name, then fill in the other details.
  5. Hit OK.

 

Moreover, here's how you can learn more about creating PVAT 20% and 0% codes in QuickBooks Desktop.

 

On the other hand, yes, we can a designated page where you can look for related discussions for QBDT only. You can check out this link, then look for the topics you need: QuickBooks help articles, video tutorials, and more.

 

Please let me know how else I can help you with QuickBooks and setting up your taxes by adding a comment below. I'm more than happy to provide additional assistance. Keep safe!