A refund reverses both the sale and the VAT you charged on it, so your records need to show the original sale and the refund as linked, matched transactions — not just a lump "refunds" expense line, which makes it much harder to reconcile your actual turnover and VAT liability at year end or on a VAT return.
Platforms like Amazon and Etsy often net refunds off against your payout automatically, which is convenient for cash flow but means the gross sale and the refund can end up buried inside a single settlement figure rather than showing as two clear, separate events in your bookkeeping. If you're claiming cost of goods sold based on units sold, a returned item that goes back into saleable stock needs to come back onto your inventory too, not just vanish from your figures. Sellers with a high return rate (common in clothing and similar categories) who aren't tracking this properly typically either overstate their real profit or lose track of stock levels — both cause problems that surface later, usually at year end when it's harder to unpick.
We reconcile refunds and returns as matched transactions, so your turnover, VAT and stock figures all stay accurate.
Talk to an AccountantA refund reverses both the sale and the VAT you charged on it, so your records need to show the original sale and the refund as linked, matched transactions — not just a lump "refunds" expense line, which makes it much harder to reconcile your actual turnover and VAT liability at year end or on a VAT return.