Record VAT payments and refunds

When you enter a transaction with VAT, we update the VAT on Sales or VAT on Purchases ledger accounts. It will depend on whether it's a sale or a purchase. This tells you the total amount of VAT from your sales and purchases.

When submitting a VAT return, we transfer amounts from the VAT on Sales and VAT on Purchases ledger accounts, to the VAT Liability ledger account. This tells you how much you owe to the Revenue. The balance of the VAT on Sales and VAT on Purchases is now zero.

When you pay your VAT return, we update the VAT liability ledger account with the amount of the payment. Once you have fully paid your VAT, the balance of the VAT liability is zero.

NOTE: If you've recorded an overpayment or an underpayment, remember to adjust the figures in your next VAT return. The figures must reflect the overpayment or underpayment.

Record VAT payment from the VAT Return >

From Reporting, select VAT Returns.
Choose the VAT Return you want to pay.
Select Pay, then enter the amount, date, and the bank account you paid from.
Select Save.

Once saved, the VAT Return shows as Paid. If you didn’t pay the full amount, it shows as Part-paid. We also update the VAT liability ledger account. When you pay or reclaim the amount in full, the balance will be zero.

Reclaim your VAT from the VAT Return >

If you're due a VAT refund, the button will show Reclaim by default. Enter the amount that you've received from the Revenue.

From Reporting, select VAT Returns.
Choose the VAT Return you want to reclaim.
Select Reclaim, then enter the amount, date, and the bank account you received the money into.
Select Save.

Once saved, the VAT Return shows as Paid. If you didn’t reclaim the full amount, it shows as Part-paid. We also update the VAT liability ledger account. When you pay or reclaim the amount in full, the balance will be zero.

Match a VAT payment or refund from a Bank Feed >

If you've connected your bank to a bank feed, it's likely that your VAT payment or refund will show in your incoming transactions.

We recommend that you:

Follow the steps above to record your payment or refund from the VAT Return.
Match your incoming payment or refund to the payment or refund already created from the VAT Return.

Match the payment or refund from your bank feed

From Banking, open the relevant bank account.
Select the Transactions link to find transactions downloaded from your bank.
Find the VAT payment or refund.
Choose Match. Select the VAT payment or refund you entered above. The type shows as VAT Payment.
Select Match.

You’ve successfully matched your VAT payment or refund.

Record a VAT payment or refund without a VAT return >

Record a VAT payment or refund to the Revenue when you don't have the corresponding VAT return in Sage Accounting.

This happens when you first move to Sage and have submitted the VAT return from different software.

Enter an Other Payment and or Other Receipt and choose the VAT liability ledger account.

Remember when you record your VAT payment or refund this way, we don't match it to a VAT return.

Make the VAT liability ledger account visible

Before you start, make sure you can select the VAT Liability ledger account on Other Payments and Other Receipts.

From Settings, choose Business Settings.
From the Financial Settings section, choose Chart of Accounts.
Select the row for the VAT liability ledger account.
From the Visibility section, make sure you've selected the Other Payment and Other Receipt.
Save.

Record the VAT payment

From Banking, open the relevant Bank Account.
Choose New Entry, then Purchase/Payment. Select Other Payment tab.
Enter the date and amount for the VAT payment.
From the ledger account drop-down, choose the VAT Liability ledger account.
Select Save.

Record the VAT refund

From Banking, open the relevant Bank Account.
Choose New Entry, then Sale/Receipt. Select the Other Receipt tab.
Enter the date and amount for the VAT refund.
From the ledger account drop-down, choose the VAT Liability ledger account.
Select Save.

NOTE: If you've made an error, you can easily go to the banking transaction to delete the transaction. Start again by recording the correct transaction through the VAT return.

How it works