How journal entries affect the VAT Return

What you need to know

You use journal entries when you want to move values from one category to another. By default, journals do not appear on the VAT return.

However, you can include VAT on your journals and report them on the VAT return, if required.

Include a journal on a VAT return

When you enter the journal, choose the check box in the Include VAT Return column. See Create a Journal for more information

Each line of the journal uses the VAT Rate set on the selected ledger account. Each ledger account has its own VAT Rate.

Read more about setting VAT Rates on ledger accounts, see Create or edit a category

How the journal affects the VAT return

The table below explains how the VAT return is updated when a journal is entered. This is determined by the ledger account used and if a credit or a debit.

Ledger Account	Default Nominal Code	Credit or Debit	Affects the VAT Return
VAT on sales	2200	Credit	Increases Box 1
VAT on sales	2200	Debit	Decreases Box 1
VAT on purchases	2201	Credit	Decreases Box 4
VAT on purchases	2201	Debit	Increases Box 4
Any income account	4000 to 4940	Credit	Increases Box 6
Any income account	4000 to 4940	Debit	Decreases Box 6
Any expenditure account	5000 to 9999	Credit	Decreases Box 7
Any expenditure account	5000 to 9999	Debit	Increases Box 7
Any other ledger account		Credit	Increases Box 6
* Any other ledger account		Debit	Increases Box 7

Flat Rate VAT Scheme

If you use the Flat Rate VAT Scheme you can’t create a journal that directly affects Box 1.

If you need to record a sale by using a journal

Use an income ledger account to record the sale. This affects Box 6
The VAT calculates using your flat rate percentage, which then updates Box 1

If you still need to amend the value in Box 1, you can manually adjust your VAT Return.

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﻿What you need to know

Include a journal on a VAT return

How the journal affects the VAT return

Flat Rate VAT Scheme

What you need to know