How do I treat a refund of expenditure?
You’ve been tagging your expenses with untied, and then one day, you receive a partial or full refund for something you previously expensed. How should you deal with this?
The easiest way to deal with this situation is to treat the refund as an additional business receipt and tag it as business income, leaving the original expense unchanged. This means that only the net expense will then flow through to your tax return. However, this isn't really doing it properly - and if your expenses are under £1,000 in total could mean that you get some relief you're not entitled to.
Alternatively, you can amend the original expense
You might want to do this if the original expense fell in a different tax period, and treating the refund as income in the year it's received pushes you over a threshold where tax at a higher rate becomes due!
If you've had a complete refund, you can
untag the original expense and ignore the refund.
If you've had a partial refund and you want to amend the original expense, you’ll need to locate the original tagged expense and amend this to reduce it by the amount of the refund.
You can reduce the original tagged expense by clicking on the item, then choosing the
advanced button (at the bottom of the screen), where you can overwrite the amount to show the net figure. This means that only the net amount you've typed in will then be claimed as a tax expense. See the screens below for an example:
If taking this action, you should not tag the refund as anything, meaning that it is ignored for tax return purposes.
Please note that when amending the amount to be claimed for tax purposes, you will not be changing the source bank transaction amount, so this amount will remain unchanged in your bank transaction feed, but only the reduced amount will be claimed for tax purposes.
If you are amending the expense for a period where you've already submitted a tax return to HMRC, you'll need to submit an amended return. You can do this easily with untied by selecting the “File as amendment” box (under Taxes>Review and submit), as shown below:
As always, please don’t hesitate to get in touch with untied via the link below if you want more help with any of this.
