PayPal VAT issue

[kev67]

How do you account for payments made to you via PayPal? - for example Mr Customer buys from me a £10 + vat item = £12, he pays via PayPal

When I go to withdraw this amount, PayPal take their charge straight away, therefore I actually withdraw only £10.25

My bank account confirms I receive £10.25, so I've always made an invoice in my accounts software for £10.25 for the exact amount to tie up with my bank statements

I had thought of making the invoice for £12 minus the PayPal charge but technically, I don't pay the charge, they take it straight away

Unlike bank service charges that are listed on my bank statements, PayPal charges aren't, so how on earth do I account for the £1.75 PayPal charge when it's taken straight away from my PayPal account and is never listed or seen on my bank statements?

Confused.com or what

Thanks

[Mike Hughes]

In Your example:

1. The invoice is for £12.00

- £10.00 to your sales account
- £2.00 to your VAT account

2. You should have a paypal account to hold the paypal payments.

- Plus £12.00 for the payment
- Minus £1.75 for the Paypal charge
- Minus £xx.xx when you transfer funds to your bank account

Mike

[kev67]

Thanks Mike, I had a feeling you would say that
You mean a PP account listed on my accounts software don't you...

I hope the VAT man aint watching this or he'll be after me as I've been reducing the invoices to suit the actual amount I receive

Not that it makes a huge difference but I use QuickBooks and have now created an item called PayPal Charges linked to a sub account of Bank Service Charges

So, I enter the invoice of the £10 + vat + £12. Then include the PayPal charge of -£1.75 (zero vat rated), so the invoice is then £10.25 but the VAT amount of £2 still remains

I think that's correct, and if so, happy days

Thanks for confirming my blonde moment