Hey Ian,
I've got it now (I hope), thanks for your help.
I was trying to figure it out without having actually transferred the commission I had deducted from my bank client account to my current account, so I couldn't tag it to the invoice i created.
I was trying to figure it all out in my head with an example where there was no the end transfer. d'oh
So to clear up for anyone else, what I have done is created the virtual/merchant account as you said and used it as a processing account for my commission.
Do not allow auto-tagging of any transactions when you upload your bank statements
So the full deposit, say £100, from the customer comes in to my client account, I tag it to my nominal liability ledger I created called "Deposits due to XXXX (1104)" as it needs to be tagged to somewhere and it is also not my money.
My commission in this example is 20% (incl VAT) so I created an invoice to the client for £20 (£16.67+£3.33 VAT).
The balance of £80 is paid out from the client account to my client leaving my £20 commission remaining in the client account.
I transfer the £20 commission to my current account and this will show on both statements.
But on QuickFile I don't tag these as a direct transfer to one another.
I tag the incoming £20 on my current account to the invoice raised which solves the VAT accounting issue (as £16.67 appears on my commission income, the rest goes to VAT sales tax).
Then I tag the outgoing "transfer to current account" £20 on my client account as a transfer to the virtual account.
Then create a money out transaction in the virtual account for the £20 and tag it to "Deposits due to XXXX" using the 'something else' tag to bring the balance of it to zero.
And that's it! £20 Invoice shown as paid. My commission income nominal account shows I have made £16.67 income. The £3.33 goes towards the sales tax VAT calculations and my "Deposits due to XXXX" shows each aspect of the process so I know if I owe money to my client or if they owe me. (This case it zeros out)
And I don't have to use a spreadsheet!
I will still run it past an accountant though.
With regards to the money collected, my turnover is only the £16.67 so I'm only accountable for VAT on that. Not the full £100 which is actually XXXXs turnover.
The sale is between XXXX and the customer. It is made on behalf of XXXX by me so the money always belongs to them even though it goes through my bank.
The £20 (£16.67+£3.33 VAT) is a separate cost for my service.
Again, I also have an agent who does this same process for myself ha, so in that aspect of my business I can be XXXX.
The way I deal with this is like how you have said with paypal. I also do that in QuickFile for my actual Paypal account also. I just wasn't thinking.
Thanks for your help.