In your guide to handling merchant services payments into a current account you mention “Whenever you are receiving an aggregated amount for a group of different sales then you can apply the methods discussed in this guide.”
I am a retail shop and I make sales for different products at the different VAT rates. Some of these are paid for using credit cards. I understand how to set up the merchant account and tag payments into the current account but how do I make the balancing payment and still account for VAT correctly as I don’t know the VAT breakdown of the 101 transactions I have taken payments for by credit card?
What am I missing here?
When you take a reading from your shop till, this should give you a breakdown of the VAT collected, allowing you to record the different levels. You would need a breakdown of the VAT charged to record it accurately.
It depends how accurately your till allows you to record things. I use an EPOS that records the amount of VAT at the individual item level and gives me a report at the end of the day telling me exactly how much VAT I’ve collected, and I can enter that on the QuickFile invoice by setting the vat rate to 20% but then overriding the VAT column with the value from the report.
If you don’t have that level of detail then HMRC offer various “retail schemes” you can use instead. If all you get from the till is a total amount for zero rated and a total amount for 20% then the “POS scheme” lets you treat the whole day as one sale and calculate the VAT as 1/6 of the standard rate total. If all you have is one overall total with no 0%/20% split then the “apportionment” scheme lets you estimate the split based on how the corresponding purchases break down.
But if you can record every sale accurately then that’s what they prefer.
Thank you for the reply and helpful information.
I take VAT at 0%. 20% and 5%. At the end of the day my epos system can tell me individual transaction details but the “z” reading will show totals. The problem is that the total is made up of part cash and part card payments and I don’t know the VAT breakdown of the card payment amount. So the card payment amount goes into the bank account and I don’t know how much VAT to apportion to that amount.
That’s not how the merchant account trick works. You create one invoice for the whole day’s transactions (both cash and card combined) using the information from your EPOS to tell you how much of the total is VAT. You then immediately log two part payments against the one invoice, one into the petty cash account (for the cash total from the Z reading) and the other into the card payments merchant account (for the card total). The invoice should now show as fully paid in QuickFile.
When you receive settlement payments from your card provider these are logged as bank transfers from the merchant account to your current account - you don’t need to raise another invoice at this point and you don’t need to know what proportion of the payments was VAT as that’s already been accounted for at the invoice payment stage above.
Similarly, when you take cash to the bank this is a transfer from petty cash to current account, again there’s no invoice generated here.
That seems simple enough.
Thank you for taking the time to explain it to me.
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