VAT and credit account payments

[jimoz]

Having already asked the accountant and somewhat confused him (probably due to my bad explanation) I thought I would post on here. I have a credit account with a certain building merchants. Someone has purchased goods through my account. They have paid the merchant direct and the merchant has built a margin in for me. All well and good. I'm just trying to understand the VAT figures right in my head. I thought I should treat the payment to my merchant account by the customer as if it was just another invoice which I had raised direct to the customer myself. Have a look at the below figures see if they make sense to anyone. I'm not sure if the VAT tallies up ok.

All these figures include VAT

Customer orders goods - pays on order - +£2443.46 (account now in credit 2443.46).
Merchant invoices me for goods - -£2146.45 (account now in credit 297.01).
Customer returns some goods - -£160 (merchant uses my credit to process refund, account now in credit 137.01).
Merchant credits me for goods received +£205.34 (over and above refund amount as I disputed the margin they built in, account now 342.35 in credit, I suppose this is the important figure which vat discrepancy will be based on).
Goods damaged on site, my responsibility, replaced via merchants - -£112 (account now £230.35 in credit).

In my spreadsheet I have put 2 sales as below
£2,036.22 + VAT £407.24 = £2443.46
£171.12 + VAT £34.22 = £205.34
Total VAT received
£441.46

I have put 3 purchases as below
£1788.71 + VAT £357.74 = £2146.45
£133.33 + VAT £26.67 = £160
£93.33 + VAT £18.67 = £112
Total VAT reclaiming
£403.08

VAT difference
£38.38

I'm not sure where this VAT difference comes from. I thought it should be perhaps 20% of my 'profit'/margin but doesn't seem to tally up. I've tried excluding the 112 as technically that is a purchase by myself to cover a loss but doesn't help. It hurts my head also because i've never actually seen this money only the profit/margin. The overall figures seem to work with my spreadsheet remaining right to other balances, but just the VAT i'm not sure

[robbob]

and somewhat confused him

I kinda see how he might have been a bit confused with all the plonked infront of him verbally

[Trevor S]

Assuming the goods are legally being sold by the merchant to you, then by you to the customer:

VAT on your sales is 407.24 - 26.67 = 380.57. This is because you're issuing an invoice and a credit note (for returned goods) to your customer.

VAT on your purchases is 357.74 - 34.22 + 18.67 = 342.19. Again, the credit is for the returned goods.

"VAT difference" is 38.38, which is the VAT content of the 230.35 credit in your account. Effectively this is the tax on the value that you've added to the goods when you sold them on to your customer!

[jimoz]

Thanks for the replies.
Accountant has come back now and confirmed the VAT i've worked out is correct.
What a head spinner that was for me. Think in future there will be no account purchases via merchant for customers. Just invoice through myself works out much easier.