VAT return for Sole Trader Showing Personal transactions
I'd be grateful for some advice please.
I am completing a VAT return for a Client. He is a Vat registered Sole Trader. His bank has a mix of personal and business so I usually record the personal under "Other Expenses" rather than exclude so as to keep the bank reconciliation correct. He received a VAT refund from HMRC to his bank recently and I recorded this as "Other income". However it appears on box 6 of the VAT return. Is there a way to keep personal "separate" from the VAT return or should it make a difference?
The saying 'never mix business with pleasure' should also apply to bank accounts.
For a Sole Trader it's almost impossible but he really should try to keep things as separate as possible. It can get really messy if/when the VATman decides to have a delve through the records.
Personal expenditure should really be entered as Drawings if it's taken from the business account & not returned. That way, they can be dealt with properly at the end of the tax year.
Use NoVAT code to keep these transactions off the VAT Return completely.
The VAT Refund should be entered into QBO via the Taxes/VAT screen - that way it will hit the correct account(s). It isn't Income as such (or Other Income) - if entered correctly QBO will show the refund from VAT Suspense account (with NoVAT code as it should definitely not be recorded on the VAT Return).