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Level 3

VAT on purchases

Hello, our business can only claim back 38% of any VAT we are charged. This causes a problem with quickbooks as there is no easy way for the amount to be tracked using quickbooks.  So we have to use a spreadsheet and upload the figures like that. Has anyone got any ideas as to whether I can get quickbooks to code 38% of 20% VAT on purchases? Thank you!

Best answer December 08, 2020

Accepted Solutions
John C
QuickBooks Team

VAT on purchases

Hi lkoups We recommend that you contact an accountant as this is not a calculation that is directly supported by QuickBooks. 

View solution in original post

QuickBooks Team

VAT on purchases

Hi there, @lkoups.


I'd be happy to show you how to add Tax rate of 38% on VAT Purchases.


After setting up your VAT settings, you can also add a Tax Rate in the Sales Tax Centre. You can refer to the steps below.


  1. Go to the Taxes menu and select the Add tax button.
  2. Choose Tax rate.
  3. Enter the details of the following:
    • Tax name
    • Description
    • Tax agency section to Purchases
    • Purchase Rate to 38%
    • Account to Liability or Expense (Note:  If you want VAT to only show on your transactions and reports, select 'Expenses' in the Account field when editing your VAT settings. If you want VAT to show on the VAT return, choose 'Liability').
    • Show net amount on return line section.
  4. Select Save.


I've also added some screenshots for additional reference.


VAT UK tax rate.jpg


Once done, you may apply the added VAT rate on the purchases you're going to make. Here's a sample Bill transaction to see where you can enter the rate:

vat bill.jpg


You may consider checking this article for your future reference in case you want to correct some errors on your past VAT returns: Adjust your VAT liability


I'll be here if you have other questions regarding VAT in QuickBooks. It would be my pleasure to help you. Have a wonderful day ahead.

Level 3

VAT on purchases

Thank you- however I think that you may have misunderstood me- so I need to calculate a rate that is 38% of 20%.

So if someone charges us £1000 plus 20% VAT that is £200 in VAT (total £1200)

But we can only claim back 38% of this VAT amount which is £76


I want QuickBooks to calculate the £76 in VAT but if I choose 7.6% then the bill above comes out at 

£1000 plus £76 which is £1076 not the £1200 that was charged to us.


So it gets tricky..




VAT on purchases

Thanks for getting back to us, @lkoups.


Allow me to jump in and share additional details.


Are you registered as a Flat Rate Vat Scheme? If so, you can set up the FRS VAT and enter the correct percentage from there. Once you use it, you pay VAT as a fixed percentage of your VAT inclusive turnover. The actual percentage you use depends on your type of business. Let me guide you how:


  1. Go to Taxes in the left navigation pane, then choose Add Tax.
  2. In the What type of tax do you want to add? page, choose Custom Tax.
  3. From the Tax name field, enter a relevant name, such as Flat Rate.
  4. Enter other necessary details.
  5. Put a checkmark in the This tax is collected on sales box.
  6. Enter the percentage amount in the Sales Rate box.
  7. Click Save.


You can read through these articles for more insights about how the VAT rates work in QuickBooks:



Feel free to tag my name if you need further help. I'd be glad to help. Take good care!

Level 3

VAT on purchases

Thanks- no- we cannot be on the flat rate scheme but I can speak to our accountant about it.


I presume there is no way to calculate the 38% via quickbooks?

John C
QuickBooks Team

VAT on purchases

Hi lkoups We recommend that you contact an accountant as this is not a calculation that is directly supported by QuickBooks. 

Andreas Alkiviades Andreou
Level 1

VAT on purchases

Hi there


im trying to setup my purchase vat rate but when i go to add tax, there is no option for me to tick purchases. Its only sales

QuickBooks Team

VAT on purchases

Welcome to QuickBooks Community, Andreas Alkiviades Andreou. I'll share information about the VAT rate in QuickBooks Online.


The reason why there is no way to tick purchases is that you might create the VAT Agency in Quickbooks Online without selecting the Claim VAT on purchases option. Since you're using the QuickBooks UK version, you don't have to create new VAT codes because QuickBooks Online automatically sets up a list of common VAT codes for you.


Then, VAT on standard purchases can be claimed back, however, VAT cannot be reclaimed back on your purchases under the FRS since it is deemed the discounted fixed rate already considers this and has taken into account the VAT purchases.


For additional information, you can click the articles below. This provides different VAT codes, rates, and how it works.



Please refer to this article to see steps on how you can turn of VAT and some helpful links about VAT in QuickBooks Online: Set up and edit VAT settings, VAT codes, and VAT rates.


If there's anything else you need help with, please let me know. I'm always here to answer it for you. Have a great day!

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