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how to account for bank interest

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Martin

19 Sep, 2011 07:54 PM

Hello

I have put my bank interest received through the account Interest Earned.

However, I see that this then appears on box 6 of the VAT return. I am told that bank interest should not be included on the VAT return.

How should I account for bank interest received so that it does not appear on the vat return? Should I book it to Income from Investments instead?

Thanks,

-Martin.

1. Support Staff 1 Posted by Admin on 21 Sep, 2011 08:46 AM

   

   Hi Martin,

   You're quite right, the interest should not be included in the VAT report for income. Currently the report includes all income. However, this does not affect the amount of tax you pay, it's an information only check for HMRC in this case.

   The app is sold worldwide, and since not all countries have the same rules as the UK, I am planning to add a flag to the account settings to exclude them from VAT. I think this will work for everyone, whether in UK or not.

   All the best,
   Mathew

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2. Admin closed this discussion on 21 Sep, 2011 08:46 AM.

3. martin_pope re-opened this discussion on 21 Sep, 2011 10:10 AM

4. 2 Posted by martin_pope on 21 Sep, 2011 10:10 AM

   

   Hi

   Thanks for the reply.

   It does affect the amount of vat payable in box 1 of the report. So if I post the vat report the amount of vat I owe in easy books will be wrong. I'll then pay hmrc the correct amount and put this through easy books but easy books will have the vat on the interest as a creditor for ever!

   Thanks

   Martin

   Sent using BlackBerry® from Orange

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5. Support Staff 3 Posted by Admin on 23 Sep, 2011 07:27 PM

   

   The interest earned won't affect the amounts of VAT, the only box affected will be box 6, which shows your income over the period.

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6. 4 Posted by Martin Pope on 23 Sep, 2011 07:48 PM

   

   Hi

   Sorry but my easy books is definitely including the vat on my interest received.

   I know this because all my income is round numbers except for some interest of £6.50. Box 1 on the vat return includes an extra 84p which is 13% of £6.50. 13% being my flat rate.

   So there is a bug that you are unaware of.

   I can supply some screenshots of my accounts to help you diagnose the issue if you like?

   Have you got an email address that I can send them to? I would rather not post them on a public forum.

   Thanks,

   Martin

   Sent from my iPad

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7. Support Staff 5 Posted by Admin on 27 Sep, 2011 07:25 AM

   

   Hi Martin,

   I've been trying to work out a solution for you, sorry it's taken me a long time to do it.

   You're quite right not to post them on the forum, good thinking!

   You mentioned the flat rate scheme, and I've had a look at the code for this and found there is indeed a calculation error in that it includes all income (excluding none) in its calculation of the flat rate to send to HMRC.

   I will obviously need to fix this, probably later in the year as I'm right in the middle of big changes anyway. I would recommend you add an adjustment (since you know what the bank interest is). To do this, just work out the adjustment amount and post it between the HMRC (VAT) account and the "interest earned" income account. I'd suggest setting the date to the first day after the VAT period end. The next update will allow you to set the "interest earned" account to outside the VAT flat rate scheme, so it won't count the additional income again when calculating the amount to pay.

   I'm sorry about that problem, but on the flipside, I'm glad you found it. I can get this fixed and it will benefit everyone.

   Thanks again,
   Mathew

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8. Admin closed this discussion on 27 Sep, 2011 07:25 AM.