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VAT Refund - Which GL Account?
04-27-2017, 01:27 AM,
VAT Refund - Which GL Account?
Hi all.

An accounting question if I may.......

I have received a VAT refund from the HMRC.
When entering the bank account receipt, which GL account should I post it to?

My VAT GL account are set-up as follows:

Input tax GL Account: VAT Recoverable (2310)
Output tax GL Account: VAT Payable (2300)

Should the refund be posted to either of the above, or a separate account?

Thanks in advance.

04-27-2017, 07:39 PM, (This post was last modified: 04-27-2017, 07:57 PM by falkoner.)
RE: VAT Refund - Which GL Account?
The best way from an accountancy perspective is to have a third account (say 2305) that is the debtor/creditor from the VAT authority. When the VAT return is submitted transfer the amounts of input and output tax from their respective accounts to this third account via a GL journal. This net amount should be the amount on the VAT return. Then when the refund arrives or the payment is made, this is netted off against this third account reducing it back to zero.

This is the cleanest way of doing it from an accounting perspective and is the way I have always treated it, and I know that HMRC prefer it that way as well.

Hope this helps,

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