How to account for scrap metal income?

Question asked by Natalie Collinson 9 years ago

As a (new) metal fabrication company, we generate a small amount of scrap metal as waste.

This is collected by a local scrap company and we receive a payment based on total weight.

We've just received our first scrap statement which shows the amount received with VAT as £0.00.

How do we account for scrap metal income - which is otherwise just waste from our business?

And if we report a VAT figure, should we then be billing the scrap company the same?

Grateful for any guidance! Thank you.

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4 Replies

Hi Natalie

If you are VAT registered then any income you get is VATable and so you'd have to account for the VAT on the money you received.

I seem to remember reading some time ago that, having got fed up with builders and other industries, selling scrap for cash and not declaring it, they forced scrap metal merchants to stop paying by cash. I also have a feeling that they forced them to provide self-billing invoices to their suppliers (you) which it sounds like has happened here.

This doesn't stop you raising your own internal invoice and declaring the VAT but they won't need it, however if you tell them your VAT registration number I think they are required to show the VAT on the "self-bill" they give you.

Hope that helps

Best answer
9 years ago

I see thanks, Natalie - I would definitely speak to an accountant as to whether you should be charging for VAT, however, for the time being you can enter the payment as described above.

9 years ago

Hello John, thank you for your reply.

This is a first transaction for us and yes, they just collected the scrap, sent a statement and paid.

We haven't invoiced them or sent them anything.

9 years ago

Hi Natalie,

You might want to set up a new account code for this on the Settings>Account codes menu specifically for this type of income, however, to record it on the system just head to Money>Bank accounts and create a money in transaction for the appropriate bank and explain using the account code and create a new contact if needed.

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I would recommend asking an accountant regarding the VAT, however, if you need to apply a VAT rate the scrap company will need to be invoiced this amount. Do they send the statement and pay instantly?

9 years ago

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