I use to be self employed but decided to go limited, I kept all my original paypal, ebay, etc. Just changed the legal entity names, addresses, etc.
The only issue now is, I have had some refunds during the time I have been limited from sales that occured when I was self employed.
How would I account for these on quickfile. Would I just create an invoice and place a negative value in it to account for this as I would not have an invoice to attached a credit note to, would this be the correct way of account for these type of refunds that I have had from sales that happened when I was self employed.
No. The refunds have nothing to do with your Ltd company. Its a seperate legal entity. If you want to refund them then it comes from the directors loan account.
If you want to submit an amended self assessment to reflect the refund that’s up to you you. But it has nothing to do with your Ltd company.
Are you sure because if I sold a company would I not sell the debt to that company aswell including all the customers so if they have issues down the line or want refunds, isn’t it the new company owner that has to refund them via the company. If this was not the case, then when a company changes entity would that not make a lot of customers be fobbed off and lose money, isn’t it a responsibility for the new entity to take over the refunds, customer service of past customers, etc.
OK. So when you sold the self employed company how much did the Ltd company pay for it? Was there any transfer of goodwill? Did you cary over the debts and assets?
I didn’t really sell it, I just went from Self Employed to limited.
I sold all the stock to the company at cost price.
But as my customers are now with the limited company and not with me directly as I am no longer self employed, should it not now be the duty of the company to look after every customer including the refunds if need be. All my paypal, ebay, amazon, etc are all the same accounts that I had when I was self employed so not including refunds on the company accounts which would be fine if it’s not allowed, would make things harder to work out what’s what as my csv files I download from Amazon/Ebay would not match what I would have in quickfile as some of the refunds would be missing.
Do you definitely know that you are not suppose to include the refunds from sales when I was self employed taking in mind the refunds are happening after the date I went limited and are being refunded from my Limited Paypal account, limted Amazon, etc as that is the same accounts where the sales happened.
Other accountants may have a differing view. However this is mine.
If you did not sell the company to the Ltd, in the form of goodwill, then there was no transfer of liability. It does not matter whether you use the same bank accounts or same PayPal accounts. That is not a deciding factor in determining if you must refund someone.
Had you said to me that you sold the business to the company in the form of goodwill, then I would have agreed that the company took on the debts of the sole trader business. But as you didn’t, then all you did do was sell the stock when the first business closed. This isn’t the same as transferring rights or responsibility.
Most company’s refund their customers in this situation so they maintain goodwill with the customer, that doesn’t mean that they can then claim a tax deduction as a result of it.
Your mixing up what you think is fair with what the rules say. Rules don’t have to be fair.
I’m not saying you can’t refund them. I’m saying it’s not an allowable cost of the company, unless that company had took on the liability. And if it had, there would he goodwill shown on the balance sheet. But there isn’t.
I have already refunded a few customers using the company accounts as there is not choice not to as it’s ebay and amazon and you have to refund from where the money was placed in the first place which was my paypal/amazon.
But to be safe I will not include these refunds in the company accounts.
Just tag the refunds as directors loan account. If you haven’t already filed your self assessment showing the self employed business ceased you may be able to get some tax relief that way. Or you may be able to amend it, or file a subsequent one with a loss. But I’d seek professional advice first
So have you been using QF all the while, or have you only switched to Quickfile when you formed the limited company? If the latter, what did you enter as your opening balances? And how long have you been trading as a limited company? You can sell the sole trader business to the limited company including all its assets and liabilities - if you essentially “pay” net realisable value for them, there is no goodwill. In that case the refunds would be payable from the company. However, you would need to reflect the opening entries correctly, and have notified all said customers and suppliers that you (the limited company) were taking over the debts of the former business.
If you have an accountant I would ask their advice. Otherwise I suggest you talk to an accountant - you will likely need one anyway to help you prepare accounts and tax return for the company as they are far more onerous than sole trader accounts.
Never used a book keeping software, use to just use spreadsheets as I was not vat registered, but then went limited 6 months ago and vat registered about 3 months ago, so my vat is now due so it’s all pretty new to me with the MTD stuff and the online bookkeeping stuff.
I sold all stock to company but I basically gave the assets free to the company as it was really only cheap stuff really as don’t need much assets and had them for a long time so worth barely any value, plus I purchased some new assets when I moved to the limited company.
Your assets also include any debts owed to you and your “customer book” even if they are not recognised as an asset in your accounts. Some businesses find they can sell their customer list so they do have a value.
I think it’s probably best if you get some advice from an accountant as you need to make sure your ltd company accounts are set up correctly in the first place.
In the short term, you can pay the refunds and code them to the Director’s loan account initially. If, after discussing it with your accountant you some to the conclusion that they can go through the business, they can be transferred to the P&L via journal.
How would I tag the credit notes so they go to the directors loan account. I created a credit note where it was paid from the paypal account as the paypal would show money going out, but then can’t create another tag on that credit note. Is there something else I would have to do?
Not sure you can do both. Tagging as a directors loan account would be done by tagging the actual payment out as something else not on this list. Instead of raising a credit note.
I worked it out overnight. If it’s nothing to do with the company just a refunded, then I thought I would treat it as a personal expense and just not created a credit note, but rather I just did a transfer out from paypal to the directors loan account on the same dates for the same values. I then placed a note on each with the paypal transaction id so it can be traced back if needbe.