Brightpearl supports the following VAT schemes:
- Standard (accrual)
Transactions are always entered using the standard method; whereby tax liability increases as soon as a sales invoice is entered, not when it is paid. The cash based VAT report makes further calculations to only report on invoices which have been paid (or part paid).
Tax codes can be used for any transaction, but it is important to recognise that some codes have a specific purpose:
T4 is for EU sales.
T7 is for zero rated EU purchases
T8 is for taxable EU purchases
T9 is for all non-taxable purposes, and won't show on the VAT return.
All other tax codes can be used for any transaction.
The type of transaction will dictate how the VAT is reported:
- Purchases, purchase credits and bank payments are all outgoing transactions and should report purchase taxes, as shown on the purchase tax control account (2201).
- Sales, sales credits and bank receipts are incoming transactions and should report sales taxes, as shown on the sales tax control account (2200).
Tax codes on orders
When an order is downloaded from a sales channel it will use the tax engine rules to decide which tax code should be assigned to each order row.
Note that the tax amount used on the order may be that calculated by Brightpearl, or that from the sales channel. Please refer to the specific channel documentation.
When an order is manually entered the tax code assigned to the order row will be the product tax code. If the customer has been assigned a specific tax code this will be used, overriding the product tax code.
If you need to edit the tax amount on an order line, make sure you also update the tax code if appropriate. Say you want to make an item tax free ... you need to zero the tax amount and also change the tax code to T9 or T0. The item net price will be posted using the line tax code, and if there is no tax, you don't want the item net amount showing against T20 (it would also appear on the VAT return under sales income).
Accounting for VAT
Brightpearl automatically posts the accounting for tax for all transactions. The accounting for tax is the same for all VAT schemes. If you are on the FRV scheme then an additional and manual accounting correction will need to be made to periodically, which will make the adjustments for your reduced VAT rate.
VAT accounting will automatically affect the following nominal codes:
- 2200 Sales Tax Control Account
All sales type transactions with VAT post to this code; these are journal types SI, SC, BR.
- 2201 Purchase Tax Control Account
All purchase type transactions with VAT post to this code; these are journal types PI, PC, BP.
- 2202 VAT Liability
This code is used when the VAT return is reconciled and the 2200 and 2201 are cleared down for the period; it uses a VR type journal.
Note that Sales Receipts (SR), Purchase Payments (PP) and Bank Transfers (BT) are always assigned tax code T9 (Not rated) and therefore will not record any VAT amounts or show on the VAT return.
Your unreconciled (not yet committed) VAT liability at any point is the difference between the balances on your sales tax control account and your purchase tax control account.
EC sales and purchases
The VAT return boxes 8 and 9 will include all sales and purchases which use the tax codes T4, T7 and T8.
Box 2 will display tax on EC purchases (purchases using tax code T8) using the rate from the company default tax code chosen at Settings > Localization > Tax settings.
Use the EC sales list to produce a report for the Inland revenue. Click Reports > Accounts...More > EC Sales list.
Flat Rate VAT
Brightpearl does not support Flat rate VAT accounting - tax will be accounted for in full. If you choose to use Brightpearl when registered for flat rate VAT manual adjustments will need to be made to account for the differences.
We highly recommend you seek accounting advice on how the journal should be entered and for what value.