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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15977
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Basic question. I am a sole trader and have just voluntarily

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Basic question. I am a sole trader and have just voluntarily registered for VAT using the cash accounting scheme. I might be due for a refund in any quarter as my work projects are long term and it might be 6 months before I get paid. Does the refund go in my R&P as a credit? is it taxable?


VAT refunds are not taxable income. In net terms, you should pay no VAT as the VAT you charge your customers is netted off against the VAT you pay your suppliers and you either receive a refund of the difference from HMRC or pay the difference to HMRC depending on whether you have received more VAT than you have paid or vice versa.

Take a look here for more information on VAT cash accounting.

I hope this helps but let me know if you have any further questions.

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Customer: replied 3 years ago.

Ok thats understood. will give an excellent rating. But the answer begs another question. Ive signed up for the monthly subscription so I am happy to put it as a separate question. The question is as far as my R&P account is concerned for the purposes of income tax do I show the cost of supplies and my income net of VAT?

You exclude VAT from your income and expenses. As I said in my previous post, as a business, you pay no VAT or receive any VAT in net terms.