VAT : The VAT return

The VAT return in Brightpearl is built by reading journals. The VAT return boxes affected by transactions depends on the nominal code and the tax code used in the journal.

Nominal code Any tax code T4 T7 or T8 T9
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 -

Here is how you can expect different transactions to be reported on the VAT return:

Transaction Type Tax control nominal Any tax code T4 for EU sales T7 or T8 EU purchases T9
Sales invoice (SI) 2200 Box 1, 6 Box 1, 8 - -
Sales credit (SC) 2200 Box 1, 6 Box 1, 8 - -
Sales receipt (SR) By default these are not taxable journals and are assigned T9  
Bank receipt (BR) with sales code 2200 Box 1, 6 Box 1, 8 - -
Bank receipt (BR) with non-sales code 2200 Box 1 Box 1 - -
Purchase invoice (PI) 2201 Box 4, 7 - Box 2, 4, 7, 9 -
Purchase credit (PC) 2201 Box 4, 7 - Box 2, 4, 7, 9 -
Purchase payment (PP) By default these are not taxable journals and are assigned T9  
Bank payment (BP) with non-sales code 2201 Box 4, 7 - Box 2, 4, 7, 9 -
Bank payment (BP) with sales code 2201 Box 4 - Box 2, 4 -
Bank transfer (BT) By default these are not taxable journals and are assigned T9  

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 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.

Learn more about tax configuration

Reconciling your VAT return

When you are happy with the numbers that display on your VAT Return, print 2 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. Once a transaction has been reconciled for VAT you will not be able to change it. 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 (transactions that have already been reconciled for VAT using the VAT Return page). 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'. This will include transactions with a date during any previous VAT period that have been entered into your accounts since the last VAT report was produced
  5. Choose whether to display a detailed report
  6. Click Submit to show you VAT return figures
  7. If relevant, copy the numbers to your paper or online VAT return (if you are using FRV you will need to convert the figures to your flat rate and post an adjusting journal)
  8. It's a good idea to display and print a copy of the detailed report for your records before you reconcile the VAT transactions
  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 and increase 2202 VAT Liability account with the amount owed to the HMRC for the tax period.

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 > More > VAT 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.

What's included on the VAT return - standard scheme

The VAT return will include tax postings made using the following journal types:

  • SI and SC

    Only sales (4000-4999), purchase (5000-5999) and tax control accounts (2200 & 2201) will be included in the VAT return.

  • PI and PC

    Only sales (4000-4999), purchase (5000-5999) and tax control accounts (2200 & 2201) will be included in the VAT return.

  • BR

    Excludes postings to purchase nominal codes (5000-5999).

  • BP

    Excludes postings to sales nominal codes (4000-4999).

  • JJ

    As long as tax code is not T9.

Journal types SR and PP are always excluded from the VAT return. Transactions made using these journal types would not normally be assigned tax - they will always be T9.

A journal row value (depending on the journal type as stated above) will be included on the VAT return where the row has been assigned a tax code other than T9. In this image row 1 and 2 have a tax code of T20 and will therefore be shown in the relevant boxes of the VAT return:

Jnl_tax_codes

The following rules are applicable to rows in JJ journals which are assigned a tax code:

  • For a sales nominal code (4000-4999) the full amount is included in Box 6 of the VAT return. A credit will increase box 6 and a debit will decrease box 6 (Sales)
  • For the sales tax control account (2200) the full amount is included in Box 1 of the VAT return. A credit will increase box 1 and a debit will decrease box 1 (Sales tax)
  • For any nominal code which is not sales (i.e. 1-3999 and 5000-9999) the full amount is included in Box 7. A debit will increase box 7 and a credit will decrease box 7 (Purchases)
  • For the purchases tax control account (2201) the full amount is included in Box 4 of the VAT return. A debit will increase box 4 and a credit will decrease box 4 (Purchase tax)

What's included on the VAT return - cash scheme

The VAT return includes the following journal types:

  • SI and SC

    Only where a payment is allocated against the invoice. If the invoice is part paid, then a pro-rated amount will be shown on the VAT return.

    Only sales (4000-4999), purchase (5000-5999) and tax control accounts (2200 & 2201) will be included in the VAT return.

  • PI and PC

    Only where a payment is allocated against the invoice. If the invoice is part paid, then a pro-rated amount will be shown on the VAT return.

    Only sales (4000-4999), purchase (5000-5999) and tax control accounts (2200 & 2201) will be included in the VAT return.

  • BR

    Excludes postings to purchase nominal codes (5000-5999).

  • BP

    Excludes postings to sales nominal codes (4000-4999).

All SR and PP type journals will be excluded even if a tax code has been assigned to the journal row.

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