Accounting updates VAT on Sales or VAT on Purchases when you record VAT transactions. When you submit your VAT Return, these balances move to VAT Liability to show what you owe HMRC. After payment, all VAT ledger accounts should show zero.

If any VAT ledger account still shows a balance, often due to reverse charge VAT, use a journal to correct it. You can check balances using the category activity report.

Create a journal to move the balance from the VAT Liability to VAT on Sales or VAT on Purchases.

Don't include this journal on your VAT Return, as you've already declared these amounts.

To create the journal:

1. Go to Adjustments, then Journals.
2. Select New Journal.
3. Choose VAT on Sales or VAT on Purchases.
4. Enter the opposite debit or credit shown on the category activity report.
5. Add a new line for VAT Liability and enter the opposite amount.
6. If both VAT on Sales and VAT on Purchases have balances, add extra lines.
7. Check that the total debits equal the total credits, then select Save.

Reverse or delete a journal

Copy a journal

How journals affect the VAT Return

Control account warnings when posting journals