Treatment of VAT refund on closing ltd co accounts

[Chart Accountancy]

Hi Accountants,

My accounttant is preparing my final ltd co accounts at the moment ahead of me passing it to the MVLers.

During the last year, for some reason HMRC refunded my company about £1k in VAT which is sitting as part of my business current account balance.

My accountant seems a little unsure how to show this. They definately havent got it as income in my P&L (which I think is right) but im not totally sure the B/S looks right in what they have passed me. In the B/S it looks something like this (for this example my true cash in bank is 100):
Assets = 99k (100-1)
Liabilities = my outstanding company tax and VAT I still owe (lets say this 10k)
Equity = 89k

So is it right to show my assets (which for me is only cash) as being lower due this VAT refund? It looks weird.

Thanks

The VAT refund cannot surely be income, so it will be wrong to account for the VAT refund in your P&L. You should contact HMRC, you can do this via the online VAT online chat and ask for more details on the £1K refund and if your VAT account is up to date. The accountant should be making this enquiry for you if they have managed your VAT returns submissions.

[ladymuck]

As you're closing up shop, you can easily fudge it with a journal - chuck it to one of the overheads accounts and it'll boost the P&L.

If you were to continue trading, I'd personally stick it to an accruals account so it shows as a potential liability and then write it off to the P&L in a couple of years' time.

[Paralytic]

If you've received a refund in error then the error needs to be cleared up. If the refund is actually due then there ought to be a balance somewhere to put it against. Your accountant needs to check the VAT returns they've submitted to work it out. HMRC don't have a habit of handing out cash.

In a previous life (where I ran a small consultancy), we had an on-premise VAT inspection (I did the books, but we had accountants to do our EOY returns) and, on the back of that, we were given a relatively small VAT refund.

To this day, I am adamant that the books (and therefore the VAT we'd paid) was correct, but I gleefully accepted the refund and ended up having to make a journal entry in our accounting software (Quickbooks as it was then) to balance the refund.

Do HMRC even do on-site VAT inspections any more?

[ladymuck]

If you've received a refund in error then the error needs to be cleared up. If the refund is actually due then there ought to be a balance somewhere to put it against. Your accountant needs to check the VAT returns they've submitted to work it out. HMRC don't have a habit of handing out cash.

[bubble99]

Hi Accountants,

My accounttant is preparing my final ltd co accounts at the moment ahead of me passing it to the MVLers.

During the last year, for some reason HMRC refunded my company about £1k in VAT which is sitting as part of my business current account balance.

My accountant seems a little unsure how to show this. They definately havent got it as income in my P&L (which I think is right) but im not totally sure the B/S looks right in what they have passed me. In the B/S it looks something like this (for this example my true cash in bank is 100):
Assets = 99k (100-1)
Liabilities = my outstanding company tax and VAT I still owe (lets say this 10k)
Equity = 89k

So is it right to show my assets (which for me is only cash) as being lower due this VAT refund? It looks weird.

Thanks