Create or delete a VAT adjustment in QuickBooks Online

Learn how to adjust your VAT due if you use the VAT feature in QuickBooks Online.

If you received a tax credit, discount, or fine, you can adjust the VAT you owe. This way you don’t have to worry about making corrections when it’s time to file.

If you're adjusting the amount to be collected, it’s likely that the agency will still be expecting the original amount. That means you'll either be under-paying or over-paying your VAT obligations.

There are a few reasons you might make a sales tax adjustment:

• Credit / Discount: a credit/discount received from the agency.
• Prepayment: an additional payment for a future return in the current filing period. 
• Prior prepayment: a prepayment which was made previously. 
• Other: penalties, interest, or rounding errors.

Here’s how to add or delete a VAT adjustment in QuickBooks Online.

Add a VAT adjustment

Step 1: Set up an account for VAT adjustment

It’s important to use the correct account type when adjusting VAT. Set up an expense or liability account if you need to increase your VAT due. Or setup an income or asset account if you need to decrease your sales tax due.

Note: If you already have these accounts, move on to creating the adjustment in Step 2.

1. Go to Settings ⚙️ and select Chart of accounts (Take me there).
2. Select New.
3. From the Account Type ▼ dropdown, select Income or Expenses.
   • If you need to decrease your VAT due, set up an income or asset account.
   • If you need to increase your VAT due, set up an expense or liability account.
4. Select the account’s Detail Type.
   • Use Sales of Product Income for an income account.
   • Use Taxes Paid for an expense account.
5. Name your adjustment account (for example, VAT due increase).
6. Select Save and Close.

Step 2: Add an adjustment

1. Go to Taxes and select VAT (Take me there).
2. Find the tax period you need to adjust, then select Prepare return.
3. Next to the entry you need to adjust, select Adjust.
4. Select the Adjustment date and the Tax rate.
5. Select the Adjustment account for adjusting VAT.
   • Choose an expense account if you need to increase the tax due.
   • Choose an income account if you need to decrease the tax due.
6. Enter the Adjustment amount.
7. Enter notes in Memo, then select Save.

Delete a VAT adjustment

You can also remove an incorrect VAT due adjustment. After deleting the adjustment, you’ll no longer see it when you review your VAT return on the Taxes screen.

1. Go to Settings ⚙️ and select Chart of accounts (Take me there).
2. Find the income or expense account you used to add an adjustment.
3. Select Run report.
4. If required, select the correct Report period and run the report again.
5. Select the adjustment you need to delete and then select Delete.
6. Select Yes to confirm.

Learn more

• Learn more about how the VAT feature works, and how to use it.
• When you’re ready, here’s how to file your VAT return and record the payment.