VAT in Accounting Start

Here we explain how we handle VAT in Accounting Start, including how to work with Making Tax Digital (MTD) for VAT.

Making Tax digital for VAT (MTD)

All businesses must keep digital records of their transactions and submit their VAT returns to HMRC using MTD compatible software such as Accounting Start.

HMRC automatically sign-up all business for MTD as part of the VAT registration service.

You must tell HMRC that you authorise Accounting Start to submit your VAT returns. You do this from the Settings in Accounting Start.

You then submit your VAT returns to HMRC from Accounting Start when they are due.

Read about how to get set up for VAT

Supported VAT schemes

You usually select your VAT Scheme when you sign up and enter your basic company information. You must your VAT scheme before you enter any transactions to make sure you include the correct VAT.

We support the following VAT schemes

If your company isn't VAT registered, select Not Registered.

Read about how to get set up for VAT

How we record VAT in your categories

This explains how we record VAT in your categories so you can understand how this shows on your financial reports and find out how much you need to pay HMRC.

How the VAT element of transctions records in the categories varies depending on the VAT Scheme that you have use. Here we explain the main differences between Standard VAT and Cash Accounting

Standard VAT

  • On this scheme you pay or reclaim the VAT at the point you create an invoice. It does not matter if you have recorded a payment for the invoice or not.
  • When you enter a sales invoice or money in , we record the VAT amount in the 2200 VAT on Sales .
  • When you enter money out, we record the VAT in the 2201 VAT on Purchases .
  • When you submit a VAT return, we transfer the amounts from VAT on Sales and VAT on purchases categories to the 2202 VAT Liability to tell you how much you owe to HMRC. The balance of the VAT on Sales and VAT on Purchases categories is now zero.
  • If you make any adjustments or corrections after submitting the VAT return, we add the amounts to the 2203 VAT Allocations & Adjustments .
  • When you pay your VAT return, we update the VAT liability with the amount of the payment. When you have fully paid your VAT, the balance of the VAT liability is zero.
  • If you have amounts remaining in your VAT categories after you pay your VAT, you pay need to enter journals to clear these values.

    Clear the VAT amounts from categories

Cash Accounting

  • On this scheme you only pay or reclaim VAT when your customer pays an invoice you have created, or you pay your supplier for a purchase.
  • When you enter an money in , we record the VAT amount in the 2200 VAT on Sales .
  • When you create a sales invoice, we record the VAT amount 2204 - VAT on Sales Holding Account . This is so you can see how much VAT you owe once you receive payments from your customers.
  • When you receive payment of a sales invoice, we transfer the VAT amount to the 2200 VAT on Sales . This is now reported on your next VAT return.
  • When you enter money out, we record the VAT in the 2201 VAT on Purchases .
  • When you submit a VAT return, we transfer the amounts from VAT on Sales and VAT on purchases categories to the 2202 VAT Liability to tell you how much you owe to HMRC. The balance of the VAT on Sales and VAT on Purchases categories is now zero.
  • If you make any adjustments or corrections after submitting the VAT return, we add the amounts to the 2203 VAT Allocations & Adjustments .
  • When you pay your VAT return, we update the VAT liability with the amount of the payment. When you have fully paid your VAT, the balance of the VAT liability is zero.
  • If you have amounts remaining in your VAT categories after you pay your VAT, you pay need to enter journals to clear these values.

    Clear the VAT amounts from categories

VAT rates to use

Depending on what you buy or sell, there are several different VAT rates which might apply.

To keep things simple, we set up and update the VAT rates for you. Simply choose the appropriate VAT rate for your transaction. The VAT rates you can choose are:

  • Standard. This is the most common rate for transactions. Currently 20%
  • Lower rate or Reduced rate. Used for certain goods and services, such as children’s car seats and home energy. Currently 5%
  • Zero Rated. Used for certain goods and services such as most food and children’s clothes. Currently 0%
  • Exempt– for transactions exempt from VAT, such as postage stamps, financial and property transactions. The net amount still appears on your VAT Return
  • No VAT – for transactions not involving VAT. These don’t appear on your VAT Return

To help you choose the correct VAT rates when you record your sales and purchases, check out our VAT rate guide.

Other VAT rates

You cannot create your own VAT rates (such as the T codes in Sage 50).

Some businesses use a sub-scheme to calculate VAT differently to the Standard 20%, So to record transactions with a different VAT rate

  • Enter the transaction and select the Standard rate

  • Change the VAT value to the correct amount

    This ensures that the transaction shows on your next VAT Return, and the amount of VAT is correct.

Read about VAT rates

Trading outside the UK

There can be different VAT charges if you buy or sell outside the UK, depending on what you are trading, and the VAT status of your customer or supplier.

If you sell goods and services to customers outside the UK, you must enter a valid VAT number on their contact record. When entering transactions, choose whether each line on the invoice is for goods or services and we'll apply the necessary VAT.

VAT on overseas sales

The VAT Return

You must send regular VAT returns to HMRC. This could be once a month, quarterly or once a year.

We automatically work out VAT when you enter your transactions. The calculations take account of:

  • Your VAT scheme

  • The VAT rate you select

  • The location and VAT number of the customer or supplier the transaction is for

Read about how each value on the return calculates.

Depending on when your VAT return is due, you will need to:

  • Create the VAT return from Accounting Start

  • Submit it to HMRC

Read about how to create and submit a return to HMRC.