To enable VAT go to Settings > Company Details > Tick the box for VAT registration. As a VAT registered business, you must charge VAT when selling to another business or non-business customer. You must also submit VAT returns to HMRC on a regular basis.
- The VAT return is based on VAT charged to your clients for goods & services (G&S) provided in the UK (also known as Output Tax).
- It’s also based on G&S bought by the business, from the UK, EU, & non-EU countries (also known as Input Tax).
Your VAT return scheme & the calculations from input & output VAT determine how much is VAT is due or reclaimed.
Set the VAT scheme in Settings > VAT Settings.
- Standard VAT (or Accrued VAT).
- If more tax is received from sales than paid on purchases, the business has to pay the difference to HRMC.
- If more tax is paid out on purchases than charged on sales, HMRC refunds the difference.
- Cash Accounting- If the business taxable turnover is under £1.35m/year, it is possible to pay VAT on the basis of cash received & paid, rather than the invoice date or when service/goods were provided.
- This may help cash flow and is useful if there are frequent late payers.
- Flat Rate Scheme (FRS) - A fixed rate of VAT is paid to HMRC.
- The difference between VAT charged to your customers & this fixed rate.
- The business cannot reclaim VAT on purchases.
- Certain industries have specific rates to apply.
Please discuss with your Account Manager on the best scheme for your business. There's a bit more information on these schemes on HMRC's website:
Set the VAT period in Settings > VAT Settings. When the business registers for VAT it will be assigned a tax period & will automatically receive a VAT return to coincide with the end of this period. Every quarter (3 months), a VAT return must usually be submitted with any payment due to HMRC no later than 30 days from the end of the quarter. For more details on this see HMRC's page on VAT deadlines:
Submitting VAT return
You can submit your VAT return direct to HMRC from within Tally with just the click of a button. You'll first need to enable online filing, for more information on that by going to Settings > VAT Settings > Tick the box for online filing and entering in your HMRC (Government Gateway) user details. For more information on HMRCs online services see http://www.hmrc.gov.uk/online/index.htm.
To run and submit VAT returns:
- Click Tools & Reports > General Reports > VAT Management & Reports.
- Click ‘New VAT Report’ & the VAT return sheet appears.
- (Optional) - Click ‘Download Calculations’ to download a spread sheet with full details of how the figures were calculated.
- Click ‘Submit VAT Return’ & you’re finished.
Tally will email you the status of failure or success depending on the outcome.
There may be times when you need to manually change the VAT calculations before submitting to HRMC – for example, corrections for previous VAT returns (to pay more or less VAT). You can create a Journal to reflect this or you can make an individual adjustment to the receipt or invoice. Please note:
- Only journals posted to Input VAT or Output VAT will be picked up in a VAT return.
- Enable Journals in Settings -> Advanced Settings.
If you make a change to an invoice or receipt that affects your VAT then this will be compensated for in your next return. For example; if you've sold something for £100 + £20 VAT which has been submitted to HMRC and you subsequently change that to £75 + £15 VAT then your next VAT return will show this invoice with a net of -£25 and VAT of -£5 - this is you claiming back your VAT overpayment.