Commission on sales - VAT & MTD

Question asked by Chris Woodfine 5 years ago

Hi, we do a lot of sales through a third party, and they charge commission.

I have been entering the sales invoices with a line for income, then a line to the expenses account of commission with a negative entry, eg:

Revenue £500.00 Commission £-20 Total due £480

This is accurate for the accounts and bank reconciliation, however, it all reflects under sales on the VAT return.

At the moment I do a manual adjustment to ensure that the sales and purchases reflect correctly, but with MTD, I don't want to keep doing this.

If I enter a separate credit note against the customer, I get the same outcome. If I were to create a new supplier for each third party, I wouldn't be able to tie up the sales invoice and purchase invoice to have the correct amount showing as due for the bank reconciliation.

Are there any suggestions of how I can resolve this so that I have the amounts allocated to the correct nominals, but also the correct amount showing as due from the customer?

Thanks in advance

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3 Replies

Hi Chris,

I believe the best way to do this would be via the following:

  1. Create a Contra account.
  2. Quick pay your invoice for the full amount to contra (i.e. £500)
  3. Create a Money out for the commission payment.
  4. Transfer the remaining amount to the business account explaining what it is for.

All the best,

Mohamed.

Best answer
5 years ago

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