Can someone explain the default UK VAT codes in QB Desktop?

tkp · ‎February 07, 2019

I've been using QB since 2001, but recently, partly as a result of trying to move to QB Online, I've been having a lot of difficulty in getting VAT coding right. For various reasons, I've now given up trying to migrate to QB Online and instead am in QB Desktop Pro 2017. Because we've been using the tool for so long, and over the years have gathered a lot of cruft in terms of VAT items and codes, I thought I'd take a look at how a newly created company file gets created in terms of VAT bits and pieces. It raises a few questions that maybe someone can answer. All of these are in the context of a brand new company file, just set up with Standard Scheme VAT:

Why is the N (Not Registered) code set up by default as Taxable and not Tax Exempt?
Same question for the E (Exempt) code: why is it set up as Taxable and not Tax Exempt?
In Edit->Preferences...->VAT, under Company Preferences, why is the answer to the question, "Choose the VAT code you use most often for ... Tax exempt items", set up to be O (Out of Scope) instead of E? Actually, the reason is obvious once you realize that E has been set up as Taxable and not Tax Exempt, so you *cannot* choose it as the answer; and you can't choose N either, for the same reason. In fact there's only one VAT code that is set up out the box as Tax Exempt, and that is O (Out of Scope), which is why it is given as the answer. But is that correct? If not, it really just raises my other questions again: *why* is E (and N) set up as Taxable? Shouldn't E (Exempt) at very least be, well, Tax Exempt?
And then back to that N code again. Why are the two VAT Items that the N code links to --- Not Registered Purchases and Not Registered Sales --- set up with their VAT Return Box fields set to <4, 7> VAT on Purchases, Net Purchases and <1, 6> VAT on Sales, Net Sales respectively? It suggests that when preparing a VAT return, purchases from a Supplier who is not registered for VAT will be treated just like Zero-Rated purchases from a Supplier who *is* VAT-registered. Is that really the way it should be?

Are the default codes (i.e. those produced by QuickBooks on creating a new company) correct?

thx.

Gordon · ‎February 07, 2019

As to the questions you have asked .

Default vat codes are set up during your initial set up of the company and its type.

From edit preferences you can turn on or off the tracking of vat and the defaults are loaded.

Best setting to start with are to leave it all alone. DO NOT choose to use supplier or Customer Vat codes and select the option for rounding as Both. Make sure you do not have any suppliers or customers set up with vat codes as well.

This then allows the Vat code set on the items in your item list to control vat as they are entered into the form.

as to the questions asked.

1 N code a taxable code as you still have to charge vat on sales to non registered customers and for non registered suppliers you still need to record you purchases in box 7.

2 E similar to N as the purchase Or sales has to be posted to the correct boxes

3 O code is not taxable and does not record anything in the vat system. The default vat code should be S & O

4 the vat items are correct as the Not registered answer above explains you still need to record the net value of sales & purchases. Boxes 4 & 7

View solution in original post

Gordon · ‎February 07, 2019

As to the questions you have asked .

Default vat codes are set up during your initial set up of the company and its type.

From edit preferences you can turn on or off the tracking of vat and the defaults are loaded.

Best setting to start with are to leave it all alone. DO NOT choose to use supplier or Customer Vat codes and select the option for rounding as Both. Make sure you do not have any suppliers or customers set up with vat codes as well.

This then allows the Vat code set on the items in your item list to control vat as they are entered into the form.

as to the questions asked.

1 N code a taxable code as you still have to charge vat on sales to non registered customers and for non registered suppliers you still need to record you purchases in box 7.

2 E similar to N as the purchase Or sales has to be posted to the correct boxes

3 O code is not taxable and does not record anything in the vat system. The default vat code should be S & O

4 the vat items are correct as the Not registered answer above explains you still need to record the net value of sales & purchases. Boxes 4 & 7

View solution in original post

IntuitErickFloyd · ‎February 07, 2019

Hi TKP,

Yes, those are defaut codes, and you can modify it the way your business works.

You can edit code details, rate and for the boxes to be affected & even the Tax Agency.

You can also use the F1 or in product help under the Help Menu for details or the preset codes.

You can also contact our support team for details at 0808 168 9535.

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Can someone explain the default UK VAT codes in QB Desktop?