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My client has used the VAT flat rate scheme (FRS) in conjunction with the cash basis for a number of years. During the past year the client received monies that are now being refunded. In some cases the refunds are because of defective work but in one case the customer simply overpaid. In all cases the refunds have been treated as a debit on the turnover account.
My query arises because the FRS percentage applying at the time of the refund is different from the percentage that was applied to the monies when they were received. How should the refunds be treated for VAT purposes?
Query T17 104 — Novo.
Reply by Neil Warren — Author of Tolley's VAT Planning 2007/08:
Just to remind readers of the basic principles of the flat rate scheme. First VAT is due on the gross sales made by a...
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