Easy Books

The VAT return is performed over a date range, similar to the profit and loss report. The VAT period is usually three months. When setting up a new business, use Settings to set the end date of the next VAT period.

The report shows the VAT form and computes the values to enter in each box. The calculation is shown below the form. If the business is set to use the Cash Accounting VAT scheme, the adjustments are listed in the report.

Adjustments are computed using the outstanding balance on each customer (and supplier) account. For sales, the sales invoices for each customer are used in reverse order to determine whether the invoice has been paid in full, or part paid. When paid in full, the value of sales is reduced by the invoice ex-VAT amount. The sales VAT due is reduced by the VAT amount of that invoice. For invoices that have been partially paid, the proportion left unpaid is used to derive a proportion of the total sales and sales VAT to apply as an adjustment.

The process is similar for the purchase invoices, using the unpaid balances on supplier accounts.

Filing the Return

Once the end of the current VAT period has passed, you can file the return. This is similar to a year end consolidation, it zeroes the balances of all the VAT accounts, transferring the overall balance to a special "VAT due" account. This account shows the amount you owe as tax due. If the option to file the return is not available, check the date you have set for the next period end under business settings. You can reach the VAT settings from the report as well by tapping the action button.

The report should be emailed in order to keep a copy, and afterwards, can be filed. Using this option posts the adjustment lines to zero the sales and purchase VAT accounts for the start of the new period. The overall balance is moved to the “VAT due” account and “Deferred VAT (Cash Scheme)” account. If you look at the accounts list, you'll find these accounts listed near the end, and if you tap on the VAT due account after filing a VAT return, you'll see all the adjustment lines that zero each of the sales and purchases VAT accounts.

Making the Payment

When the VAT amount is paid to HMRC, you will enter a transaction between the “Cheque Account” and “VAT due” account. The date should be set to the date the payment is made, the amount is the amount paid to HMRC.

After the payment has been entered, you should expect to see a zero balance on this account as highlighted.

Note: You don't need to enter anything in the deferred VAT account, this is used by the app to adjust for VAT in the next return.