The VAT return

The VAT return is a report that displays a summary of all transactions where VAT is applicable, to be sent to HMRC (or the relevant tax authority).

It is run periodically, typically once a quarter.

Reading the VAT return

The VAT return is comprised of the following sections:

Headers and settings


Immediately on loading the VAT return, you will see the settings above. The fields are:

Setting Description
Report generated Lists the date and time the VAT return is being run.
Date from, date to Allows you to select the start and end date of the period you wish to run the report for.
Inc current reconciled

Choose whether to include transactions already reconciled in the period.

When running a new VAT return, this should be set to "No", but can be set to "Yes" if you wish to report on reconciled transactions within a specific period.

Inc earlier unreconciled

Choose whether to include transactions dated before the period which are not reconciled.

Typically this would be set to "Yes" when reconciling a new VAT return.

Count earlier unreconciled transactions Selecting "Yes" will display the number of earlier unreconciled transactions which would be included if the previous setting is also "Yes".
Show detail Selecting "Yes" will add a third section to the report detailing the figures making up each box on the return.

Once the settings are configured, clicking "Show VAT form" will bring up the VAT return.

The VAT return



A grid will be displayed, listing each box of the VAT return across the top, and the figures for each individual tax code included in the return down the side. You can control which tax codes are included by using tax regimes - learn more here.

At the bottom of the grid is a table, summarizing each box and displaying what should be sent to HMRC.

You are also given information on how many transactions were included in the return.


If "Show detail" is selected in the settings, below the table you will see a list of all transactions making up the VAT return.


They are split per box: Sales, Purchases, EC sales, EC purchases, Sales tax, Purchase tax and EC VAT

Each section is further split down by tax code.

It is recommended to make a copy of this data before reconciling your VAT return, for your records.

How the VAT return is populated

The VAT return in Brightpearl is filled in using the information on journal entries.

The nominal code the journal uses, the tax code and the journal type all define which box is filled in on the VAT return.

In general, the rule of thumb is as follows:

Nominal code Any tax code T4 T7 or T8
2200 Box 1 Box 1 -
2201 Box 4 - Box 2, 4
Sales 4000-4999 Box 6 Box 8 -
Non-sales, not 4000-4999 Box 7 - Box 7, 9

For more detailed information, please see this article about populating the VAT return.

Excluding tax codes from the VAT return

If you are required to report tax in more countries than the UK, you will need separate tax codes for each reporting scheme.

To ensure tax codes and transactions relating to tax payable outside of the UK VAT can be reported on, use tax regimes. A tax regime is a category of tax code.

The VAT return will include only tax codes assigned to the "VAT" tax regime. You can create as many tax regimes as you need to separate tax codes into reporting groups.

Reconciling your VAT return

When you are happy with the numbers that display on your VAT Return, save two copies then click the "Reconcile VAT return" button.


A journal will be created to transfer the VAT payable from your sales and purchase tax nominal codes into your VAT liability account. This will mark each transaction included in the return as reconciled.

Warning: Once a transaction has been reconciled for VAT you will not be able to change it without undoing the entire return, which is not recommended. It is good practice to ensure that all Brightpearl bank records have been reconciled with the bank statements for the VAT period first to reduce the chance of errors.

How to run a VAT return

  1. Go to Accounting > VAT Return
  2. Select the date range
  3. Choose whether to include reconciled transactions in the current period
    • The usual setting for this option is "No"
  4. Choose whether to include unreconciled transactions prior to the chosen period.
    • The usual setting for this option is "Yes" 
  5. Choose whether to display a detailed report
  6. Click Submit to display your VAT return figures
  7. If relevant, copy the numbers to your paper or online VAT return, or use the Making Tax Digital (MTD) app to submit the return to HMRC
  8. Display and print at least one copy of the detailed report for your records before you reconcile the VAT return
  9. Click the "Reconcile VAT Return" button to mark all the included transactions as reconciled for the tax period

Marking the VAT return as reconciled will post a VR type accounting journal to clear down the 2200 Sales tax control account and 2201 Purchase tax control account, rolling their difference into the 2202 VAT liability account with the amount owed to or from the HMRC for the tax period.

The VAT liability (VR) journal

The VAT liability entry will clear down the 2200 Sales tax control account and the 2201 Purchase tax control account.

If the value of the 2200 Sales tax account is greater than the 2201 Purchase tax account (the most common scenario), a journal along the following lines will be posted:

Account code Debit Credit
2200 Sales tax control account X  
2201 Purchase tax control account   X
2202 VAT liability account   X

If the value of the 2200 Sales tax account is less than the 2201 Purchase tax account (i.e. you are reclaiming money from HMRC), the journal will be as follows:

Account code Debit Credit
2200 Sales tax control account X  
2201 Purchase tax control account   X
2202 VAT liability account X  

Note that all rows on VR entries will use the T9 tax code.

Submitting your VAT return to HMRC (MTD)

VAT returns can be submitted to HMRC electronically using the Brightpearl HMRC app.

Learn more about MTD and submitting your VAT return digitally.

Paying your VAT

If you owe money to HMRC, use a bank payment to record the payment from your bank account, posting it directly to the VAT liability account. The amount paid should be the balance of the VAT liability account leaving an overall balance of zero after the payment has been processed.

If you are receiving money from HMRC use a bank receipt to record the payment into your bank account, posting it directly to the VAT liability account. The amount received should be the same as the balance of the VAT liability account, leaving the overall balance as zero after the payment have been processed.

To check the balance of the VAT liability account, view the trial balance.

Viewing previous VAT returns / historical VAT returns

You can view the transactions that have been included on previous returns by opening Reports > VAT return history from the main menu.

Running a VAT return for the same dates as a previously reconciled VAT return will not provide a historical VAT return view.

Each time the VAT return is run it produces results based on current data, so any new transactions added since the VAT reconciliation will be included too.

Why is my VAT return incorrect?

You are responsible for ensuring that all of your VAT returns are submitted correctly. If you suspect there is an error, then it is recommended to review all journals included in that return via Reports > VAT return history. You should also seek advice from your accountant.

Unreconciling your VAT return

If the VAT return has been reconciled accidentally, you are able to remove the return and redo it.

To do so, go to Reports > VAT return history and click "Remove" next to the relevant return:


Warning: This will not cancel the VAT liability journal entry - you will need to go into the general ledger and cancel the journal manually.

Have more questions? Submit a request