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JackS11
Level 2

Expense refund - bank feed - VAT - Help!

I operate a simple small business with a single bank account, which everything goes through. I use the bank feed as a to-do list, going through the "For review" to add all expenses. Hopefully this isn't a bad way of doing it....

 

I've had a few occasions where I purchased something however then changed my mind and had it refunded. So I see the payment then the refund come up on the For Review feed. From here I add the payment as an expense, then the refund as a deposit.

 

I thought this was correct, however upon a recent VAT return, I noticed that the refund deposit was hitting Box 1 and Box 6, showing as income from a sale, which isn't correct.... In this instance the transaction was Zero rated so didn't have a material affect on the VAT return. However I think it looks strange as there is income in the Box 6 (Net value of sales) and not Box 1 (VAT on sales)....so it looks like I'm selling without VAT, which is not the case....

Solved
Best answer July 29, 2022

Accepted Solutions
paul72
Level 7

Expense refund - bank feed - VAT - Help!

Hi @JackS11 

 

I don't use Bank Feeds but you should be entering the refund as a Supplier Credit.  Then match the refund to the credit.

Don't get into the habit of amending VAT Returns - one day that'll come back to bite.

 

Entering as a Deposit, QBO must assume that it's a sale & treat accordingly.

 

Hope this helps.

View solution in original post

4 REPLIES 4
GebelAlainaM
QuickBooks Team

Expense refund - bank feed - VAT - Help!

Hi there, @JackS11. I'm here to help you fix the issue and make sure the refund deposit will correctly reflect the boxes on the VAT returns.

 

In your case, you'll need to review the transactions and ensure the VAT codes are correct. Since it'll depend on what you've added and categorised in the For Review tab. You can always make changes if necessary. This way, the amounts will be reported correctly on the VAT return. Also, with regards to in entering the refund, you'll need to enter it as a Supplier Credit.

If you need to make changes to the VAT codes, you can follow the steps below:

 

  1. Go to the Taxes menu and choose the VAT tab.
  2. Select Submit return.
  3. In Boxes 1 and 6 rows, click Adjust.

If you want to choose the correct codes, please refer to this article: Common VAT Codes.

 

For more insights into managing your VAT payment and refund, you can review this article: Recording a VAT payment or refund in QuickBooks Online.

 

I'll also be adding the following articles for future references:

 

 

If you need more help in managing your VAT return, feel free to return here. I'll be around. Have a good one!

 

JackS11
Level 2

Expense refund - bank feed - VAT - Help!

So when I'm selecting VAT for something which is paid for then refunded, I select No VAT for both the payment and the refund, so neither appear on the VAT return?

Mark_R
QuickBooks Team

Expense refund - bank feed - VAT - Help!

I appreciate your prompt reply, @JackS11.

 

Allow me to share some information about changing VAT codes for the transactions (payment and refund) in QuickBooks Online.

 

When you change the VAT codes of your transactions, this may affect an incorrect calculation of taxes in QuickBooks. Though you can make any changes to the VAT codes, however, I still recommend seeking help from a tax advisor. This way, they can help you can manage your VAT returns correctly.

 

I'm also adding this article to learn more about managing VAT in QuickBooks: VAT: Getting started. This will help you keep accurate records of the tax that you collect and pay.

 

Please let me know how it goes in the comment section below, @JackS11. I'm only a post away if you have any follow-up questions. 

paul72
Level 7

Expense refund - bank feed - VAT - Help!

Hi @JackS11 

 

I don't use Bank Feeds but you should be entering the refund as a Supplier Credit.  Then match the refund to the credit.

Don't get into the habit of amending VAT Returns - one day that'll come back to bite.

 

Entering as a Deposit, QBO must assume that it's a sale & treat accordingly.

 

Hope this helps.

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