Journal entries move values between ledger accounts. By default, they don’t affect your VAT Return. Selecting Include on VAT Return when you add a journal, updates your VAT Return based on the ledger account. The following table shows which VAT Return box updates when you enter a journal. | 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 | If you use the Flat Rate VAT scheme, journals: - Don’t affect Box 1, because we calculate VAT due as a flat percentage of sales
- Don’t affect Box 4, because you can't recover expenses
- Don’t support transactions outside the flat rate scheme
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