This article describes how to explain a VAT refund that has been paid into your bank account by HMRC.
Once the relevant bank transaction has been imported into your FreeAgent account via a bank feed or uploaded from a bank statement, you will need to explain it using the appropriate ‘Type’ and ‘Category’ as detailed below.
Please note that you need to have level 6 access or above to your FreeAgent account to explain bank transactions. If you need to explain a VAT payment that you've made to HMRC, please see this article.
1. Navigate to the relevant transaction
First, navigate to the ‘Banking’ tab at the top of the screen and select ‘Bank Accounts’ from the drop-down menu.
Choose the relevant bank account from the list.
Select the transaction that relates to the VAT refund.
2. Choose ‘Refund’ as the transaction ‘Type’
Select ‘Refund’ from the ‘Type’ drop-down menu.
3. Choose ‘VAT’ as the transaction ‘Category’
Scroll down and select ‘VAT’ from the very bottom of the ‘Category’ drop-down menu.
4. Explain the transaction
Select ‘Explain Transaction’ to complete the process.
What happens next?
The transaction will appear on your VAT ‘Statement of Account’, which can be accessed by navigating to the ‘Taxes’ tab at the top of the screen and selecting ‘VAT’ from the drop-down menu.