I've just noticed that on the partial refunds (Refund Adjustment), there is no VAT deductions.
I have sold an item on 12/11/2020 for a price of £100 + £20 (VAT) = £120.00
Then on 20/12/2020 I have made a partial refund of £30.00
On the tax report from Shopify I'll see this partial adjustment of (£ -30.00) as a net amount without any VAT attached/deducted.
My questions is, should I have not see on the tax report from Shopify that I have issued a refund of (£ -25.00 (Net Amount) + (£ -5.00 VAT)) = £ -30.00 in total ?
PS. When I do a cancellation of order or full refund then I can see these adjustment correctly with deduction of net amount and VAT. Only when partial refund is made there is no VAT attached.
Thank you for your assist with my question.
Kritesh here from Better Reports support team.
I believe this is to do with refund discrepancy, i.e. the excess/shortfall of the returned item. To give more context, Refund discrepancy is Shopify's way of balancing the order. If a product line is refunded, Shopify first cancels that line (including its tax) and always refunds the full amount of the product. If you refunded less (or more) than what the customer paid for, Shopify records an additional 'Refund discrepancy' line to compensate for the difference. This is recorded against net sales (since it doesn't relate to a particular product and therefore does not have a tax rate associated with it).
The exact calculation would depend on how you did the partial refund. To take your example, if on 20/12/2020 you had the entire quantity of the item refunded as well, then you'll see a reversal of the entire tax amount and a £120- £30 = £90 appear in your net sales (against no particular product since the product was refunded).
Alternatively, if you did not refund the quantity sold in Shopify and only did a refund, the £30 would appear as a negative value under refund discrepancy. Again, with no associated product and therefore no tax.
We can create a report that shows this split by line item for each order and can also schedule this to be sent at a regular cadence (say daily). This report can also be exported directly to Excel, csv or pdf.
I encourage you to install Better Reports and start your free 14-day trial, and I'll be happy to set this up for you.
In addition to building custom reports to meet your specific needs, you'll also get access to 60+ built-in reports that cover many common use cases for merchants and our reports can be scheduled to send to your email or Google Drive at set frequencies.
Let me know how you go and feel free to reach out if you have any further questions.
We have the same issue - made worse as the partial refund exports as a no VAT invoice to our accounting system (Xero) and then every one has to be identified and edited manually for VAT reporting.