Post journals so the VAT Return is correctly affected - UK only

How the VAT Return is affected by journal entries depends on the nominal code and tax code you use to post the journals. When you post journals to adjust the VAT Return you cannot reduce the values in a box, you must increase the values in the opposite box. For example, if you want to decrease the value in Box 1 you must increase the value in Box 4.

The VAT Return includes an Adjustments option which you can use for manual adjustments in preference to journal workarounds.

This article explains how to post journals to affect the boxes on the VAT Return.

To post a journal:

  • On the navigation bar click Nominal codes, then click Journal entry.

The following table advises which journals to post to effect each box on the VAT Return.

The default nominal code for the Sales Tax Control account is 2200 and the default nominal code for the Purchase Tax Control account is 2201.

Box to affect Journal Credit/Debit Nominal code Tax code
Box 1 Journal Credit Sales Tax (2200) or Purchase Tax (2201). T1
  The other side of the journal is usually posted to the nominal code affected by the net amount.
Box 4 Journal Debit Sales Tax (2200) or Purchase Tax (2201). T1
  The other side of the journal is usually posted to the nominal code affected by the net amount.
Box 6 Journal Credit Any nominal code other than the Sales Tax (2200) or Purchase Tax (2201). T0, T1 or T2.
Box 7 Journal Debit Any nominal code other than the Sales Tax (2200) or Purchase Tax (2201). T0, T1 or T2.
Box 8 Journal Credit Any nominal code other than the Sales Tax (2200) or Purchase Tax (2201). T4
Box 9 Journal Debit Any nominal code other than the Sales Tax (2200) or Purchase Tax (2201). T7 or T8.

If you don't want to affect the VAT Return you must use a T9 tax code.

Example 1

For a £/€1,000 net sale to nominal code 4000 with £/€200 VAT, post the following journal:

N/C Name Details T/C Debit Credit
4000 Sales nominal code Net Sales T1 0.00 1000.00
2200 Sales Tax Control Account VAT T1 0.00 200.00
1200 Bank current account Bank T9 1200.00 0.00

This would affect boxes 1 and 6 on your VAT Return:

  • Box 1 - 200
  • Box 6 - 1000

Boxes 3 and 5 are also impacted as these calculate using the value in box 1.

Example 2

For a £/€500 net purchase to nominal code 5000 with £/€100 VAT, post the following journal:

N/C Name Details T/C Debit Credit
5000 Purchase nominal code Net Purchases T1 500.00 0.00
2100 Purchase Tax Control Account VAT T1 100.00 0.00
1200 Bank current account Bank T9 0.00 600.00

This would affect boxes 4 and 7 on your VAT Return:

  • Box 4 - 100
  • Box 7 - 500

Box 5 is also impacted as this calculates using the value in box 4.