Performing a VAT Return

This video covers filing a VAT return and entering the transaction for the VAT payment.


Further Information

Read the transcript

This video is for value added tax only, also known as VAT. See our other videos for information about corporation tax.

Before using Easy Books to calculate the VAT you owe, make sure you're using the correct tax settings. Look in business settings under VAT. If this is the first time you've used Easy Books to calculate it, you might need to set the scheme and the end date of your first VAT period.

Use the VAT report to file each period once you've entered all the transactions up to the due date. It's useful to reconcile each bank account and credit card before you begin so you know everything's up to date.

The start date is set automatically. For the first return it defaults to the date of the first transaction. Once you've filed the first period it defaults to the first day in the next period.

Once the end date has passed, run the VAT report and check the end date. Send the report by email or to Dropbox. Then file the VAT return using the "folder" button. This moves the money you owe into the account "HMRC (VAT)".

When it comes time to pay your VAT, simply add a new transaction from your bank account to your "HMRC (VAT)" account.

This reduces the bank balance and the balance of the "HMRC (VAT)" account.

References to VAT in the user guide
Why is it important to file each return?

In Easy Books there are some special tax accounts used to keep track of sales VAT and purchase VAT. As you enter purchases and sales and record the tax amounts, these amounts affect the balances of the tax accounts. Just like when you consolidate your financial year, you should consolidate your tax accounts too.

This is especially important when using one of the cash based VAT schemes, where Easy Books also needs to manage the outstanding balances owed by your customers and defer payment of VAT based on unpaid invoices.

When starting to use Easy Books, set the date of the next VAT period end to the next period end after the first transaction you entered into Easy Books. Then each time you use the File Return option in the VAT Report it will automatically lock the old period and move the date on by three months (unless you've chosen a different period in the settings).

What if I change scheme part-way through a tax period?

There are a number of tax schemes such as "Standard", "Flat Rate" and "Cash" based.

Changing from one scheme to another involves some manual calculations because Easy Books supports only one scheme at a time. The best way to deal with a change in scheme is to do it in two stages.

First run a report for the remaining time in the current scheme by changing the date of your next period end to the changeover date. Run the report and file it. Then change the scheme and set the date of the next period end to the actual end date. Run the report and file it. The amount due shows in the account "HMRC (VAT)" as before. The VAT-100 form you file will need to be manually adjusted, combining the total tax, purchases and sales for the two shorter periods.