Early Self Assesment! (refunds)

moo_juice

Hi, can someone clarify something for me. I am doing THIS YEARS self assesment! (need to apply for a mortgage in a few weeks so need to get this ready for the IFA asap)

My question is regarding refunds. So I am self employed, I buy stock in, and sell it online. I have had a few instances this year whereby a supplier has been unable to fully or partially fulfill the order and has refunded the monies. I have also used my account to purchase christmas presents and returned a couple for a full refund also.

I am struggling to get my head around what to record for these events.

So for business expenses (and/or personal expenses), would I count the orders placed fully (as either business expense or personal), and count the refunded money back in again as income? or just cancel it out/not record it?

surely if a personal order is made then refunded, i can't claim that refund payment toward income can i?

How should I do this? Help!

londonTiger

self employed isnt really ideal for your business model, may be worth doing your accounts through an accountant, you will get month by month income for it. If you're able to afford a mortgage then it looks like you're doing quite well so I'm sure you can afford the £300 or so a year for an accountant.

An account verified p&l will be much more "legit" in the eyes of the mortgage lender than your self assessment, in an ideal world nobody is going to declare more income than they actually earnt and pay more tax - but people have done crazy things. Something garanteed by an accountant is a lot better, and ideally a month by month accounts which will show some steadyness in your income rather than an annual statement which could be for seasonal business which I assume lenders don't paticularly like.



Any refunds on purchases, I would simply minus (-) the expense/income (relevant balance)

Any customer refunds I would minus (-) the income.. e.g.

total revnue say £10,000
less refunds (£900)

total £9,100

then do the same for expenses

then gross profit (income-expense)

for self assessment you dont do anything after gross profit because tax is calculated by self assessment and you get your net profit calculated by them too.

John_Pierpoint

moo_juice wrote: »

I have also used my account to purchase christmas presents and returned a couple for a full refund also.

surely if a personal order is made then refunded, i can't claim that refund payment toward income can i?

How should I do this? Help!

Try never do this. It gives HMRC an excuse to crawl all over your (and your partner's ?) private personal transactions. You know that 24 months after a transaction you are going to look ridiculous trying to explain every transaction on your personal bank account, as against your "business" account.
Obviously expenditure on Xmas presents and any possible refund have no place in the accounts and so profits of your business. Mark up clearly on your accounting system what happened, so that you can explain it any time in the next few years.

moo_juice

So would it be better to transfer a "wage" say £100 a month from the main business account into a personal one, and use that account for misc personal purchases.

nomunnofun

moo_juice wrote: »

So would it be better to transfer a "wage" say £100 a month from the main business account into a personal one, and use that account for misc personal purchases.

Absolutely - in a word!