Splitting VAT from invoice

Bradders · ‎October 27, 2021

Hello,

I wonder if anyone can help. I am very new to Quickbooks so I apologise if this question has been asked before.

I purchase childrens and adult clothes from our supplier. Pretty much every invoice I receive has a split of 0% VAT and 20% VAT items.

I think I am on the right track by splitting the transaction.

The total amount is £130.71. This is broken down into £74.80 at 20% VAT - £40.95 at 0% VAT - £14.96 VAT charged.

I have entered all this onto the Split function, but then receive the error "

You have either selected a tax liability account on a transaction where it's not allowed, or haven't specified a tax rate along with it."

I have set my "default tax rate selection" as "inclusive of tax".

I have attached my screen shot

I really hope someone can help me out.

Kind regards

GeorgiaC · ‎October 27, 2021

Thanks for getting back to me Bradders, yes those would be the correct inclusive amounts to calculate the £14.96 VAT - the inclusive of VAT setting applies only to creating manual transactions, so any time you raise a sale or expense you'll see this defaulted to inclusive of VAT - the bank itself is always set to inclusive of VAT, as setting this to exclusive would be adding VAT on top of the amount that has hit your bank (hope this makes sense!). :)

View solution in original post

GeorgiaC · ‎October 27, 2021

Hi Bradders, thanks for joining us here on the Community :)

The VAT Control account is a default account used in QuickBooks to track the VAT on all unfiled transactions that have been allocated a specific VAT code (such as the 20% S code), and as such, wouldn't be applied to a transaction in this way.

All VAT applied to transactions from the banking screen are calculated as inclusive of VAT; in your scenario, you would split the transaction over two lines with the respective VAT code. The calculation of £74.80 at 20% VAT + £40.95 at 0% VAT = £14.96 VAT has been calculated on an exclusive basis, so you may need to double-check the amounts you're entering here.

Please get back to us below if you have any Q's!

Bradders · ‎October 27, 2021

Thanks for your reply GeorgiaC

Would this mean I would add the VAT calculated on the £74.80 (£14.96) to the £74.80 giving £89.76?

I would then have two lines:

Purchases - 20% - £89.76

Purchases - 0% - £40.95

This would work. I just wanted to make sure that when QBO creates VAT reports, it would know to calculate the 20% on the £89.76 line giving me the £14.96 VAT (to claim back)

Am I also right to change my setting to "inclusive" rather than "exclusive"?

Appreciate your help.

GeorgiaC · ‎October 27, 2021

Thanks for getting back to me Bradders, yes those would be the correct inclusive amounts to calculate the £14.96 VAT - the inclusive of VAT setting applies only to creating manual transactions, so any time you raise a sale or expense you'll see this defaulted to inclusive of VAT - the bank itself is always set to inclusive of VAT, as setting this to exclusive would be adding VAT on top of the amount that has hit your bank (hope this makes sense!). :)

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Splitting VAT from invoice