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"Test" sale through website

Hi

Have just switched to Square. I wanted to check that everything was working correctly with website/square/bank account. I put a “test” purchase through our own website and paid for it by personal credit card. On Monday, Square will transfer this to our company account. I need some guidance with some accounting issues:

. How do I tag the money in to bank account? I’m wanting to add it to the DLA.
. As a VAT registered company the “test sale” has 20% VAT added which I’ve paid. No actual product exchanged hands so does it still need to be added as “turnover” and the VAT element paid away?

Thanks

Hi @Harvie,

This guide should hopefully help you with how to process in QuickFile Accounting for income from a payment service provider

With regards to the VAT element I would double check with an accountant

Hi Beth

Thanks for the link. I was using Paypal for payments before Square so I’m OK with how to get “real” income correctly into Quickfile. My question was more that this was not a “real” sale, merely me checking that all things were working correctly. I’m happy for the value of the transaction to be credited to the DLA, just have no idea on how to get it there :thinking:

The normal way you deal with these kinds of systems in QuickFile is to have a separate bank account representing the payment provider - payments you take are paid into that account in full, settlement payments you receive in your current account are transfers from the Square merchant account to the current account, and fees you are charged by Square are settled from the merchant account on a regular basis (if it’s anything like Stripe you’ll probably get a monthly invoice or statement from Square detailing the fees they’ve deducted, which you can “pay” from the merchant account).

So for this test payment you’d do it as a transfer from the DLA to the Square merchant account on the day you made the payment. On Monday you’ll get a net settlement from Square which you handle in the usual way as a transfer from the Square account to your current account, and the fee will roll into the next monthly invoice. I would agree with you that since the test payment isn’t “consideration for a supply” then you shouldn’t owe any VAT, but check with an accountant if you want to be 100% sure.

This isn’t a sale, it’s really just a director’s loan (however small), so you should be able to tag the transaction directly to DLA without any VAT being involved.
Has Square produced the invoice for you with VAT added or have you produced an invoice in Quickfile? If in Quickfile, then simply void the invoice and tag the entry from Stripe straight to DLA. If the invoice has been produced by Stripe, you can always refund the entry (which would also test the refund side works!) and raise a credit note which would then reverse the 20% VAT.

Hi

Thanks for the reply.

Square takes its fee at the time of the transaction. The monthly invoice which is available just details fees that have already been taken. It is issued from Dublin and quotes an Irish VAT number (so I’ve been told by their customer services) I guess that I will have to reverse charge the total amount of the monthly invoice.

Check with your accountant on that one - you might not need to reverse charge if it’s a service that would be exempt from VAT if it were supplied in the UK. Though it’s a bit academic if you’re entitled to recover all your input VAT as in that case doing the RC anyway will be cost neutral.

If you do want to RC then you may want to read some of the previous posts on the subject (such as this one I wrote a while back) as it’s not as simple as the QuickFile user interface suggests it should be.

I have just received November’s invoice from Square.

This has been quoted on the bottom of the invoice

“These fees have already been deducted from your deposits and are not outstanding.
*Reverse Charge Notice: Under Article 44 and 196 of the EU VAT Directive, the place of supply is where the recipient is located”

I think that does clarify that charges made through Square will need to be RC.

Really appreciate everyone’s help with regard to this query.

The reverse charge moves the responsibility to account for VAT from the supplier to the recipient, but it doesn’t necessarily mean you have to pay VAT - if you receive an invoice that says the reverse charge applies then that means it’s up to you to assess whether any VAT would be due on that supply if it were made by a UK supplier, and if so then account for it as if you were the supplier as well as the recipient.

If it’s a service that would be exempt from VAT if it were supplied in the UK (which card processing fees are) then I believe that the reverse charge doesn’t apply, but check with an accountant to be sure.

Again, thanks for the reply. Reading the link it would appear that card processing fees are exempt from VAT.

Just a quick question. On another one of your posts you stated that you were having to RC your Stripe invoice. Wouldn’t Stripe be classed as a card processor making them also exempt from VAT?

If I had done my research in this much depth at the time then I would have come to the same conclusion and might not have bothered to RC :slight_smile:

Though given my business doesn’t make exempt supplies it doesn’t really make any difference to my actual profit or cashflow, it just adds the same amount to boxes 1 and 4 in the VAT return which cancel each other out.

We’re in the same position, as we don’t make any exempt supplies. It seems to be that we are having to complete additional work, without it affecting profit or cashflow. For us, it is just a number reorganising workload. It’s no wonder that so many VAT are not completed correctly.

Thanks again