VAT in Accounting

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

  • On this scheme,

    • you reclaim VAT when you record an invoice from your supplier.

    • you pay VAT when you invoice your customers.

  • On this scheme

    • you pay VAT when your customer pays you.

    • you can't reclaim VAT on your purchases until you have paid for them.

    This is also called the receipts or moneys received basis.

    You can use this scheme if either:

    • Your annual turnover is not more than €2,000,000 or,
    • Your supplies are almost exclusively, at least 90% made to customers who are not registered for VAT or, are not entitled to claim a full deduction of VAT.

    Find out more on the Revenue website (Opens in a new window).

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 ledger accounts

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

How the VAT element of transctions records in the ledger accounts 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 other receipt , we record the VAT amount in the 2200 VAT on Sales .
  • When you enter a purchase invoice or other payment , 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 ledger accounts to the 2202 VAT Liability to tell you how much you owe to the Revenue. The balance of the VAT on Sales and VAT on Purchases Ledger accounts 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 ledger accounts after you pay your VAT, you pay need to enter journals to clear these values.

    Clear the VAT amounts from ledger accounts

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 other receipt , 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 an other payment , we record the VAT in the 2201 VAT on Purchases .
  • When you create a purchase invoice, we record the VAT in the 2205 - VAT on Purchases Holding Account . This is os you can you see how much VAT you can reclaim, once you pay your suppliers.
  • When you pay your supplier, we transfer the VAT amount to the 2201 VAT on Purchases. This is now reported on your next VAT return.
  • When you submit a VAT return, we transfer the amounts from VAT on Sales and VAT on purchases ledger accounts to the 2202 VAT Liability to tell you how much you owe to the Revenue. The balance of the VAT on Sales and VAT on Purchases Ledger accounts 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 ledger accounts after you pay your VAT, you pay need to enter journals to clear these values.

    Clear the VAT amounts from ledger accounts

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 – 23%
  • Reduced Rate – 13.5%
  • Second Reduced Rate – 9%
  • Zero Rated – 0%
  • Exempt – Transactions are exempt from VAT. The net amount still appears on your VAT Return.
  • No VAT – for transactions not involving VAT. These do not appear on your VAT Return.

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

The VAT Return

Revenue will need regular VAT return submissions. 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

  • Submit it to Revenue

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

What's next

Set up VAT

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