UK Brexit Sales under 135 UK pounds to non VAT registered businesses or consumers in the UK

Oh, Brexit. What fun we will have. 

So the current rule is that if you have a Sales transaction of under 135 UK pounds to a UK consumer (non VAT registered persons or business in the UK, including small businesses not registered for VAT) you will have to file a UK VAT return. 

This means you will have to set up a separate instance of SortMyBooks UK to handle these transactions, and use the built in HMRC interface to file a VAT return with HMRC. 

We will talk about how to identify the above Sales in another article. This article is merely how to record these Sales correctly in your Irish Accounts. 

First we will start with the assumptions. We are assuming that you are making these sales, along with many other Sales, through some sort of merchant account.  We are assuming that the merchant account will still be giving you one payout to your current account.

To handle this, you can set up the following accounts in your Irish SortMyBooks

Your Irish Sales will continue to go into the merchant Contra Account (whether it is Stripe or Paypal or Go Cardless or Other)

Your qualifying UK Sales cannot go in here, they will have to go in your UK SortMyBooks to be filed on the HMRC VAT Return. 

Your merchant account payout, however will likely include ALL the sales payouts including the qualifying UK sales.

So you will end up with a lopsided effect where your bank account is reflecting a payout from all the Sales, but your Merchant Account and your Sales P&L are missing the qualifying UK Sales. 

To rectify this you need 2 transactions which you can take care of once a month, or once a week, or every time a qualifying UK Sales comes in.

First: Do an Account Transfer from the UK Sales Contra to the Merchant Account. 

Second: do a Misc Lodgment into the UK Sales Contra Account with Nominal Sales. 

Now your contra accounts will be correct, and the qualifying UK Sales will will in your P&L where they belong, and not affecting your Irish VAT Return. 

But I like journals instead of all those account transfers.

Ok here's the accountant/bookkeeper "journals are my comfort zone" method. We're making all the same assumptions as above. 

Instead of setting up a UK Sales Contra Account, Click on Tools and Nominals and scroll down to the Current Liabilities section, click on one of the nominals eg. Current Liability 1, 2 etc. Rename it to be eg. UK Sales Liability.

To enter these specific UK Sales into SortMyBooks, click on Accounts and Journals and Add. You can do this weekly, monthly, or whenever a UK Sale of this time occurs.

Type in the date and in description type in something that will help identify the purpose of the Journal like UK VATable Sales. Click on OK and then on the next screen, click on Add New Line.

Debit UK Sales (BS), Credit Sales (P&L), in Amount put in the gross amount of the UK Sales Including the UK VAT. Click on Ok and then click on Add New Line.

Debit Merchant Account (BS), Credit UK Sales (BS) and click on OK.

Check your P&L and Balance Sheet to make sure that it's come out as you expect. 

Key points: Your UK Sales (under 135 pounds to a non VAT registered British person) cannot go into Sales Invoices in your Irish SortMyBooks because then they will end up in your VAT 3 and RTD.

If you have sales like this then you're going to have to register for VAT in the United Kingdom. To handle your UK VAT return you'll need to set up a UK version of SortMyBooks to file your VAT with HMRC. You can do that here https://sortmybooksonline.com/#createaccuk 

FAQs:

What about sales to the UK that are over 135 pounds? Those sales get entered into Irish SortMyBooks as a Zero% export sale. Your customer will have to pay VAT at point of entry upon receipt in the UK.

What about the VAT I pay to HMRC? Where does that go? You can set up a P&L Cost of Sale Nominal for this.