We sell a medical product at www.peglegs.co.uk, which is VAT-Exempt but only if bought by a customer with a permanent disability or long term illness. Otherwise it is rated as standard. The vast majority of users are coping with a short-term injury.
Customers order through the website and are charged VAT, which they pay as part of the cost of the item, via Paypal. If they are disabled, they complete a form tio declare and I refund the VAT element of the sale as a Paypal refund. What my bookkeeper seems unable to do is to categorise this payment as 100% VAT. How should she proceed?
She mailed me the following
"I have tried to post it directly or produce a credit note on the ‘PayPal sales’ account which you cannot do either. I have tried to post it to manual adjustments and journal it into the VAT due on purchases account but then it does not show up on the VAT report we would use to submit VAT.
I am sorry to say I am stumped at this one, I don’t think the package provides you with the facilities you are now needing as your company is growing in a different way e.g. VAT exemptions."
I am reluctant to move to another system and hope you can guide us on how to process this refund (which happens in a tiny number of cases)