Please help with my first VAT return - I'm really unsure about a few things. Anyone using Bokio?
Hello, I’m a UK based FBM seller registered as sole trader/proprietor and I only sell to UK at the moment no plans to sell anywhere else. All my stock is sourced from UK.
I realised I was miraculously at 85k turnover threshold and registered for VAT and have successfully received my VAT number and am verfied on Amazon so now I have to get my first VAT return ready for HMRC and I want to do it without using an accountant becasue my operation is quite simple but I really don’t understand several elements of it and am getting myself all worked up with a deadline looming.
Not knowing that this would be the big success it has been during Covid I don’t have a business or even separate bank accounts, the Amazon disbursements go direct into my personal account and I transfer them to an instant access savings account for a few weeks until I transfer a portion back to my current account to pay off the personal credit card I use to pay for all my stock and other related expenses, is this going to be a problem with HMRC?
I have a basic excel online spreadsheet with all my figures and have signed up to Bokio to do my accounting and VAT returns, does anyone have any experience of this who could help me please? Am I supposed to make separate ‘journal’ entries for each part of every sale? that’s how i’ve done the first few entries but it seems so cumbersome and time consuming.
Also my sole trader name is my real name but my ‘shop’/‘business’ on amazon is something else entirely, am I going to be in trouble? I don’t see other sellers using full real names and they can’t all be limited companies.
This is my process so far using Bokio for sales back in October (the first ones in my current VAT return period):
- create a Sales of Goods, 20% VAT entry - enter the total price the buyer paid including all fees and shipping (£43.98) I don’t have any invoices showing the VAT from the time of sale(because I wasn’t registered then) so I copy the packing slip and upload that. the software calculates the 20% VAT (£7.33) and I save it and close it.
- next I create a Purchase of Goods, 20% VAT entry and upload the invoice. total £24.99 including VAT of £4.17
- Now for the Amazon fees which is what i’m having trouble understanding. they were £8.97 for this sale, I can create an Other Direct Expenses entry but I don’t know whether to include VAT of 20% (£1.50) and if I do then what else do I need to do to get that 1.50 back/even it out?
I thought that my profit from this sale would be 43.98 minus the 24.99 minus the 8.97 minus the difference between the output and input VAT in this case 3.16 (which I owe HMRC) which equals : 6.86 BUT i’m not confident that i’m dealing with the VAT on the Amazon fee part correctly and I’m really scared of getting penalised and/or having to do all the calculations/entries again if I get it wrong.
can someone please help me so that I can get my head around it and race through the few hundred sales I need to enter. thanks in advance
8 replies
Seller_NoMNQDGnEW5Bx
Did you make a claim for stock held at the point you registered?
You dont need to report each sale individually, use the summary reports, fees reports etc for each month otherwise you’ll be doing it forever
Seller_osUpANPu1ufyn
I forgot to mention that I opted into the Making Tax Digital system of reporting because I wanted to become comfortable with doing it that way before it become compulsory so I can’t change back to the simple 9 box form on the .gov site.
What do I do with all my invoices if I simply create one large entry for say the last day of the period?
What about the VAT on the Amazon fees? do I put that as a sales commission or a reverse charge VAT refund or something like that?
Seller_zRxGmTYygCKIT
With VAT, the destination of the product is the big thing. So for example, if you ship outside of the UK, then VAT is not payable (or it’s reverse charge) - depends on the country.
You may also have to register for VAT abroad too.
Registering with an accountant will be beneficial for you, they are worth their weight in gold, as they know all the legal ways to reduce the amount of tax you pay. Our accountant charges like £600 a year, but saves us more than that in tax etc, and they check things to make sure it’s all done legally. (That price includes the use of Sage).
On a good note, if you get the VAT wrong and overpay it, then HMRC don’t really care. Its when you underpay it then it can lead to awkward discussions in future.
Also personally, I wouldn’t have any funds going into your personal every day account. Set up another account and keep everything going through there. If your using a personal credit card, I’d set a 2nd card up. This way you can have a black and white line between which card is used for personal, which is for business. Means that if someone asks to see the bank statements, when you hand them over, its easier for them to see which transactions are business and which are personal.
Seller_xUKHc5xSYJmI4
My suggestion is employ someone who specialises in this field. I understand Amazon has third parties who offer these services. The fees are for a limited company is around £300 to £600 so shop around.
Seller_esvgLzKXw2YAl
I would strongly advise using an accountant. They will save you money overall.
Unless you really know what your doing, your going to find yourself in a mess with it.
Agree totally with what others have said. Separate bank account is a must. Makes life so much easier.
Seller_mVDcRkqYu2Tyf
Again I agree with others separate bank account and a good bookkeeper/accountant. But its also nice to get an understanding for yourself. Vat returns are easier if you use xero/quickbooks with A2X/linkmybooks as these two do all the hard work for you and your not posting individual sales which will eat up a lot of time.
I believe fees prior to having entered your VAT number do have a VAT element on them.
Once you enter your VAT number into amazon you are no longer charged VAT on them they fall into reverse charge category, expect advertising linkmybooks have a good article on this.
Seller_7VbclcPFFRTnc
Get an accountant.
VAT is not something you can just hope to get right.
I trained as an accountant 15 years ago and even back then we were forwarned about various tax regulations regularly changing - that’s without Brexit !!
If you’ve hit the magic 85k then you can definitely afford one and the rule of thumb is that they should save you more than they charge. You should also have some money come back to you as you can claim vat back on all the stock etc you held on the date you registered so make sure you have done a full stock take
