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Dealing with VAT in QuickBooks® Online

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Dealing with VAT in QuickBooks® Online

Please note: this post has been updated (Oct 16).

Further update Dec 16.

In order to achieve accurate VAT returns to HMRC (known as VAT 100) accurate VAT data has to be entered into QBO.

QuickBooks Online Advanced ProAdvisorIn many respects QBO makes this easy for us: we can set default VAT codes for expense accounts and it also remembers previously entered VAT information for suppliers and customers. Both of these facilities, however, can lead to errors that will lead to incorrect totals in the VAT reports which will be used to complete the VAT 100. Specifically,

  • an expense account can have a default code but not all items posted against that account will have that code (Travel may have a 20% default to cover fuel costs, but public transport tickets have 0% VAT rate)
  • QBO will be quick to pick up repeat expenses to the same supplier using both expense account and VAT codes from the earliest transactions; if these were posted incorrectly, that error will replicate itself across numerous transactions and can potentially lead to large differences in the end.

So it is best to be mindful of the different VAT codes that are possible within QBO and also what broadly will fit within them.

Firstly, be aware that one of the company preferences that has been set will indicate whether the default in transactions is for ‘VAT inclusive’, ‘VAT exclusive’ or ‘No VAT’. This can be changed within each transaction, but the data entered should reflect what is set in this drop-down: if set to ‘VAT inclusive’ it is important that the gross figure is entered leaving the VAT to be split out automatically.

Here are the different default VAT codes within QBO and examples of the sorts of items that will be set against them:

20.0% S Standard (In QBO there are Sales and Purchases 20% S codes) Most goods and services
5.0% R Reduced Domestic fuel & power

Installation of energy saving materials

Residential conversions

0.0% Z Zero-Rated Most food

Books/ newspapers/ magazines

Children’s clothing

Public transport

Exempt Exempt from VAT Goods supplied by or purchased from a non VAT registered business (this is to ensure the purchase appears in the correct box on VAT 100)

Stamps and postage

Insurance and finance/ credit

Education and training


Betting/ gaming/ lottery

20.0% ECG EC Goods Standard Intra EU B2B purchase of Goods

In B2B transactions, it is the customer who must account for any VAT due via the reverse charge mechanism (i.e. the customer must act as if they are both the supplier and the recipient of the goods).

20.0% ECS EC Services Standard Intra EU B2B purchase of Services
0.0% ECG/ECS EC Goods/ Services Zero-Rated Intra EU B2B sale of Goods/ Services

If the EU customer is not VAT-registered, then the applicable UK rate of VAT is charged.

20.0% RC Purchase Reverse Charge Extra EU Reverse Charge
0.0% RC Sales Reverse Charge Extra EU Reverse Charge
No VAT Outside the scope of VAT Local authority rates

Wages/ salaries

Donations to charity

Statutory fees e.g. MOT/ congestion charge/ fines


The subtlety is between zero-rated, exempt and outside the scope of VAT. The first two are reported on VAT 100 and the last is not so it is best to get them accurate. Strictly speaking a zero-rated product is being sold with VAT, but at 0% currently, whereas an exempt product is being sold without any VAT.

If you are in search of more detailed information regarding how QBO deals with the various UK VAT situations and how it posts to the various boxes on VAT 100 have a look at this QBO VAT helpsheet.

Setting up VAT in QuickBooks® Online

If you’re stuck with the initial set-up of VAT in QBO have a look at this helpful training video.  Good luck!

Dealing with VAT in QuickBooks Online

71 thoughts on “Dealing with VAT in QuickBooks® Online

  1. VAT cannot be reclaimed on business entertainment.
    Which VAT rate should you use to record this?
    Exempt, Zero or No VAT?
    Thank you

    1. Good question. VAT paid on business entertainment cannot be classed as input tax, so from QBO point of view it should best be listed as ‘outside the scope of VAT’. It is possible to set this as a default for this expense account.
      It is true that you have paid VAT on it, but this cannot be set against output tax from sales – both exempt and 0% would suggest that the service purchased had no VAT paid on it. Any other thoughts anyone?

  2. HI
    what is the difference between “Reverse Charge Zero” and “Reverse Charge Services” you have mentioned both to be Intra EU Reverse Charge, please could you explain what does this mean.

    kind regards

    1. Hi. Goods supplied within the EU are not regarded as imports or exports because it is one ‘market’. They are acquisitions or despatches. Any VAT is collected from the buyer and the rate is dependent on whether or not the buyer is registered for VAT. If the buyer is not VAT registered then they will be charged VAT at whatever rate applies in the supplier’s country.
      If both the supplier and customer are liable to VAT (VAT registered) and within the EU, it is the customer that must pay the VAT for the product at the local rate and then ‘claim it back’ via the reverse charge mechanism. So, if a UK customer buys a product from a German supplier, the goods are zero rated at the point of despatch – the QB supplier enters 0% ECG/ECS. However, the QB customer enters 20% ECG (the local VAT rate on most purchases) and 20% RC against the purchase. What this is doing is adding the VAT figure to both the VAT owing box on the VAT Return and the same sum to the VAT reclaimed box. So effectively, the purchase is VAT free.
      For the supplier to zero rate the product/ service, they must be certain that the customer is VAT registered and within the EU.

      1. I have vat 3 Ireland, I get invoices from the Uk so i use vat code ECS. when i go to settings in vat item for purchase is 23% vat which should be 0%

      2. Hi
        I would understand that you are a VAT registered customer – so you should be entering 23% ECG or ECS if that is the current VAT rate in Ireland. The reason for this is explained in my reply to the previous question.
        The ECG/ ECS codes deal with both sides of the VAT issue – declaring the output tax and reclaiming the input tax.

  3. How do you actually enter 20% ECG and 20% RC against an EU purchase please?
    Also which vat code should you select for sales to non business customers in the EU and also those outside the EU?
    Many thanks

    1. Hi
      Thanks so much for asking this question because it has forced me to look into this in much greater detail.
      I have confirmed with QBO technical support that ECG/ECS are for transactions within EU, whereas the RC codes are for interstate transactions outside the EU where reverse charging (tax shifting) is applicable. Regarding the latter, you will need to consult the HMRC documentation online.
      Sticking with ECG vs. ECS: if you have made a purchase from a VAT registered company within EU and you are yourself VAT registered the reverse charge mechanism comes into play. As stated before, the supplier can zero rate the sale if there is certainty that the customer is VAT registered as well. The correct code would be 0% ECG for goods and 0% ECS for services. The UK customer enters the 20% ECG/ ECS code against the net cost of the purchase. These codes then post to the appropriate boxes on the VAT 100 – that is,
      ECG posts to boxes 2, 4, 7, 9
      ECS to 1, 4, 6, 7.
      I have only been able to clarify all this by speaking to technical support – it is not at all evident anywhere else.
      As to your second question, if it is a B2C within EU sale you have to charge VAT in the normal way as if the customer is in the UK (20% S).
      For sales outside the EU you should get advice from an expert in the field and/or consult HMRC.

  4. Re purchase of services from a EU based provided, why this is not also shown in Box 9 as an acquisition?

    In addition when were are using the RC code?

  5. Hello, when entering my sales figures do I list them with the gross figure inclusive of vat or the net figure exclusive of vat?

    1. Not quite sure what you mean by ‘entering sales figures’. When you enter a deposit in QBO to bank you can choose to either enter the gross figure inclusive of VAT, or the net figure exclusive. There is an option for inclusive/exclusive/no VAT on the top right of the screen. The default setting for this is dictated by company preferences. If you’re a VAT registered business you will decide on this default depending on whether you advertise your prices as VAT included or not.
      Sales invoices and receipts work in the same way.
      If you’re not a QBO user and this is a general book keeping question, you should record the net sales figures in your sales ledgers and VAT in your VAT control account.

  6. Hi – just getting starting with Quickbooks, and this page is very helpful, so thanks.

    What would be the correct classification for sales outside the EU (eg to the USA) ? I’m guessing simply ‘No VAT’, because I can’t see that any of the other categories are correct.

    1. With imports from China (anywhere outside EU) I reckon you are better off marking all purchases as Exempt and then entering the C79 payments (VAT collected on import) as an adjustment in the VAT Centre (Prepare Return.) The alternative is to use the RC codes but the chances are that this will not tally with the C79s.

  7. Hi – Need your help here!!
    I import goods from Asia to London and i understand that i need to pay VAT on my purchases which is 20%. Wanted to understand the following:-
    1. How should i account for this tax in Quick books. Should i use 20%ECS or ECG or other category?
    2. I think i can set this VAT paid on purchase with my sale transactions in London. just wanted to confirm this.
    Appreciate your help here.

    1. Hi
      Sorry for the delay in reply. For details of VAT on imports (from outside EU) and acquisitions (from inside EU) see
      You are correct that you need to pay VAT on your imports and you should have proof that you’ve paid it (C79.) If you’re VAT registered, you can then reclaim it as input tax – that means it goes on your VAT return in the same way as any other VATable purchase made in the UK. The correct code should be 20%S therefore.

  8. Just because a supplier is not VAT registered, it should still appear in box 7! Yet you have put this under No VAT/OTS which would exclude it in the VAT return?!

  9. Hi,
    Can anyone help with the posting of a refund for EU VAT on QBO? I have tried the recommended method by going in through receive a payment and changing it to refund but this hasn’t worked and I have the money sitting on the bank feed with nowhere to put it at the moment. Thank you in advance

    1. Hi
      Sorry for the delay in reply. There is a new look to the VAT Centre which may have changed things. Now, when you look at your filed returns there is a link on the right for Record Payment. When you click on this it allows for payment and refund. If this matches what comes through the bank feed the item will show as a Match. It’s important that you Receive Payment in the VAT Centre before accepting the money through the bank feed so that the correct posting to VAT Suspense occurs.
      The old system could be a bit tricky. I hope the new one works for you.

  10. I ran the “No VAT transactions report” as a way of checking items which had been posted as outwith the scope of VAT but have a 30 page report which includes bills and sales credits posted as standard-rated VAT. For bills I have three lines – net, VAT and gross amount – on report and for payments I have multiple duplicate entries. What are the parameters of this report and does this indicate a problem?

    1. Hi
      This doesn’t occur when I run the No VAT transactions report – it just shows what you would expect. Are you running the experimental reports layout available through the Labs? If so turn it off and try again. Otherwise it sounds like one for the helpline – they will do a screenshare and will help you solve or pass it on to the technical people. Good luck!

    1. I quote from HMRC:
      If you supply goods to a customer in another EU country who isn’t registered for VAT in that country, and you are responsible for delivery this is a ‘distance sale’. The most common examples are mail order or internet sales to private individuals in another EU country.For distance sales, you must charge VAT at UK rates in the normal way. However, each country has a ‘distance selling threshold’. If the value of your sales to that country exceeds this limit, you must register for VAT in that country, and charge their rate of VAT on sales to that country. If you sell goods or services to someone who isn’t VAT registered in another EU country, you must charge VAT in the normal way, just as you would for a UK customer. You include the sale in your VAT Return for the period when the tax point takes place. This is just the same as for sales to UK customers.
      Use 20% S – the 20% ECG is for purchases from EU VAT registered businesses.
      If you sell to EU VAT registered businesses you use 0% ECG.

  11. Trying to sort VAT on services purchased from another country within the EU. On the invoice it shows the taxed amount as being £3.40, but when I apply the 20% ECS code in Quickbooks it shows the taxed amount as being £4.08. If I apply the 20% S code then the taxed amounts match up, but this is not the correct VAT code to use. Any ideas on using the correct code and the taxed amounts being the same?
    Spoke with Quickbooks and they do not know what to do! Any suggestions would be appreciated 🙂

    1. Hi Kathryn
      I’m assuming the following:
      – you are a VAT registered UK business
      – that you’ve been billed from EU for services supplied.
      If that’s the case the supplier should have billed at 0% (0% ECS in QBO) leaving you to reverse charge at 20% (20% ECS).
      If that hasn’t happened you could ask for another bill.
      If VAT has been charged in the home country you shouldn’t reverse charge – so 20%S will be fine your end.
      As to the detail, I would understand that you have a bill which is showing VAT charged of £3.40 – this will be subject to currency conversion as will the overall bill. My guess is that this will explain the discrepancy – unless bizarrely your ECS VAT rate in QBO has been corrupted. Check the settings in the VAT centre to check this – if the original file was created in QB desktop the VAT rates will be editable/ have been edited.

  12. We buy services from a number of non UK based businesses. We are a VAT registered UK business.
    I’ve understood from what I’ve read above, that the expenses for services (advertising) supplied by FaceBook and Google, based within the EU, should be entered as VAT included 20%ECS, which posts the purchases under the Reverse Charge rule in the right boxes on the return.
    For another service supplier, based in the USA, I need to use the 20%RC code.
    Is this all correct?
    Thank you for a brilliant service!

    1. Hi Charles
      Firstly thanks for the nice comment! Secondly, yes to both your suppositions. Once you’ve got your head around the boxes each code posts to it starts to make sense … For a VAT registered business in the UK their purchases should be the 20% reverse charge codes and the sales should be the 0%.

  13. hello, Am hoping one of you can help me with this. About to file my first VAT return so trying to make sure everything is correct. My problem is with items that we either haven’t paid vat on or got a receipt in order to claim it back. Looking at previous threads on forums the advice was to post at 0% rather than no vat for items that would normally have vat on if the person you are paying was registered. however this has meant i have figures in box 6 (Net value of sales), which is really confusing me as we haven’t sold anything, we only currently have expenses/bills. then when I print out a VAT detail report for box 6 & 7 the items in box 6 also appear in box 7, along with more items in box 7 that don’t appear anywhere else. is this something to do with the type of expense? would appreciate any advice. I tried QB chat and they told me to put everything we weren’t claiming at No vat but I didn’t think that would be right.

    1. Hi
      Up to the date you become VAT registered everything needs to be marked as No VAT – otherwise the transactions will show on the VAT 100 as you say. On and after that date you should use the standard VAT codes, bearing in mind that if you make a purchase from a non-VAT registered business you need to mark it as Exempt (or 0%) so that it does show on the VAT 100.

  14. Hi,
    I have already set up the tax on Dec 2017 but VAT on UAE was implemented just this month. Is there a way I can change the period that VAT has been implemented on QB? I also cant match the bank charges on the banking page as it will require me to choose tax on the transaction.

    1. Hi
      In the UK version of QBO you can edit the start date for the start of the VAT regime. Go to Taxes (VAT Centre), click on Edit VAT, then Edit Settings. In the next screen the key box is the Effective Date for New Scheme, which will either be the start date for the QBO file or the date the tax agency tells you. You can then adjust the Start of the Current VAT period to make sure that QBO starts the VAT filing period correctly.
      Regarding VAT on bank charges, these are Exempt in the UK so that would be the correct code. It is possible to edit the Expense account via the Accounting screen and set the correct default VAT code so you never have to think about it.

  15. we purchased items from U.S, entered them as no VAT over the years and have now got several TAX certificates which the accountant says we can claim VAT back on. Trouble is i have no idea how to enter this on QBooks? It is additional input VAT to reduce liability.
    Any ideas how to enter this on Qbooks before I submit my last quarter?

    1. Hi
      There are a few ways around this. I think the safest – meaning least likely to lead to messy problems later on – is to create a 100% VAT contra expense entry. To do this use the following method:
      1, Click on the + sign and choose Expense
      2, Either choose a payee or leave that box empty
      3, On the first line of the expense choose any of your Expense accounts
      4, For the amount enter a pound (1) and choose 20% S as your VAT code
      5, On the second line choose the same expense account
      6, For the amount, enter minus a pound (-1) and choose No VAT as a VAT code
      7, The total of the expense will show as 0
      8, Under the Subtotal box the VAT box become editable
      9, Enter the desired VAT amount into the VAT box
      10, Add the C79 details in the memo box and date the expense the same as the certificate. Save the expense.

  16. HI there,
    I have a question about selling things to outside EU. Is it NO VAT on it or is it treated as 0% rated supply?
    I found on HMRC website that even it is Outside the scope of VAT it should be reported as zero-rated supply.
    Any suggestions how should handle this in QB? , thanka

    1. Hi Dorota
      According to the HMRC website:

      VAT is a tax on goods used in the EU, so if goods are exported outside the EU, VAT isn’t charged. You can zero-rate the sale, provided you get and keep evidence of the export, and comply with all other laws. You must also make sure the goods are exported, and you must get the evidence, within three months from the time of sale. This can be longer for goods that need processing before export and for thoroughbred racehorses.
      The time of sale is the earlier of:
      the day you send the goods to your customer
      the day you receive full payment for them
      You mustn’t zero-rate sales if your customer asks for them to be delivered to a UK address. If the customer arranges to collect them from you, an indirect export, you may be able to zero-rate the sale as long as certain zero-rating conditions are met.

      It wouldn’t make much difference whether you used 0%Z, Exempt or 0%RC VAT code in QBO, but the correct code should be 0%RC because the export is liable to reverse charging wherever it is exported to.

  17. Hi
    I am on a flat vat tax so I charge client 20% vat but pay 8.5% flat rate. So if I charge £100 + VAT =£120.00 I only pay VAT £10.2 so I have £9.80 from the VAT I charged the client left which I assume this balance should be posted to my P&L.. Do I have to manually do a journal to get the balance in my sales? and if so what Journal entry do I make?

    1. Hi
      I assume you are using the FRS setting in the VAT Centre – go to edit VAT settings and check if the box is ticked.
      I am not familiar with how QBO deals with FRS but I assume it tracks the VAT owing until you submit a return, and then posts suitable adjustments to the VAT Control account. I suggest you contact the Helpline who will do a screenshare with you to check if it is all working correctly.

  18. I want to record my sales in my shop. some of which are VATable, some are not. for example I had total sales of £1927.76 of which £6.84 attracted VAT. the rest is exempt. how would i do this accurately in QBO

    1. Hi
      Do you produce a daily sales receipt for your shop’s takings? Even a weekly one? I suggest you do. Set up Shop Takings as a customer then create a Sales Receipt. This will allow you to have multiple lines – with different VAT codes. The receipt will then show as a Match on the Banking screen.
      Alternatively when the deposit appears in the Banking screen you can Split the transaction into different lines with different VAT codes. I hope that helps.

  19. Hi I have purchased a new van on finance and paid the VAT as deposit how do I show this as a full vat cost?

    1. Hi David
      So you are buying a van and you are paying the VAT on this purchase up front as a deposit.
      There are a couple of ways of doing a VAT only expense in QB:
      1. Create an expense with 2 lines, first line with VAT inclusive value of 1, 20%S VAT code; 2nd line same expense account value -1, coded No VAT; you can then fill in the VAT box underneath Subtotal with the VAT figure that is being paid.
      2. Create an expense with 2 lines, first line with gross figure for the purchase, 20%S VAT code; 2nd line same expense account value negative net cost, coded No VAT; this will produce an amount owing of just the VAT element of the purchase.
      Both methods will post the Total to the VAT Control account.

  20. Hello and thank you for the useful information! I am just starting out and trying to figure out how to record VAT. I am not yet VAT registered so not sure if I should still be capturing these VAT codes for expenses? When I run a profit and loss report it seems to show the amounts excluding VAT.

    1. Hi Jamie
      If you’re not VAT registered you don’t want to turn on the VAT tracking feature of QB – so don’t enter a fictitious VAT registration number or go into the VAT Centre and switch it on. This will mean that the VAT column should not appear on any expense transaction or any invoices you create.
      However, if you have done this by mistake everything should be marked as No VAT. This will mean all your expenses will be gross on your P&L.

  21. Hi
    We have received a invoice from a US attorney – just trying to work out what VAT code to use in QB’s ?-We are Vat registered in the UK.

    1. Hi
      Thanks for your question. As the HMRC website says:
      When you buy services from suppliers in other countries, you may have to account for the VAT yourself – depending on the circumstances. This is called the ‘reverse charge’, and is also known as ‘tax shift’. Where it applies, you act as if you’re both the supplier and the customer. You charge yourself the VAT and then (assuming that the service relates to VAT taxable supplies that you make) you also claim it back. So the 2 taxes cancel each other out.
      The correct code for Reverse Charge purchase of services & goods is 20%RCSG – this posts the VAT to boxes 1 & 4, and the net purchase value to 6 & 7.

  22. Thank you so much for this really great service with superb information.

    I am new to Quickbooks. I have been using my own spreadsheets to prepare my accounts and VAT returns. In preparation for Making Tax Digital I’m working out how to record my transactions in QuickBooks.
    I work as a performer.
    Under normal circumstance this is the process by which I receive income:

    My agent finds me a job with a TV production company.

    My agent negotiates a fee for my services of £1,000.

    After the job is completed my agent invoices the TV company for £1,000 + £200 VAT

    2 weeks later the TV production company pay to my agent the fee of £1,000 together with the VAT of £200

    My agent charges me a commission of 10% and therefore makes a deduction of £100 from my £1000 fee.
    My agent charges VAT on this commission (20%S) of £20
    That’s a total deduction of £120.

    My agent then sends me a statement detailing the fee payment received for me together with the VAT, and the deductions made:

    £1,200 fee including VAT
    minus deductions of £120.
    Total = £1,080.00

    My agent then transfers a net payment of £1,080.00 to my bank.

    To record this process in Quickbooks I am trying the following. And I’m hoping this is the correct procedure?

    I create a sales receipt with the TV company as the customer. In it I record the fee of £1000 with VAT at 20%S
    Under “Payment method” I chose “Add new” and created a Payment method called “Transfer to bank from agent”
    Is this correct?
    Under “Deposit to” I have chosen “undeposited funds”.
    Is this correct?
    I’m very uncertain about which “payment methods” and I should be depositing to.

    Then in the expenses section I create an expense transaction. I record the £100 payment of commission along with the 20%S VAT charge of £20.
    I record the supplier as my agent.
    The bank / credit account is set to “undeposited funds”.
    Is this correct?
    In line 1 the account is set to “Cost of Goods / Commission to agent”. The amount is £100 (Exclusive of tax) with £20 VAT showing along with a total of £120.00

    This seems to work and generates a correct VAT 100 report.

    So I’m hoping this basic entry procedure is ok (?)

    If I assume for a moment that this is roughly correct then my main question is about how to record a different scenario when the VAT is late . . . this happens quite frequently . . .

    My agent negotiates a fee for my services of £1,000.

    After the job is completed my agent invoices the TV company for £1,000 + £200 VAT

    2 weeks later the TV production company pay my fee of £1,000 to my agent but they do not yet pay the VAT element.

    My agent charges me a commission of 10% and therefore makes a deduction of £100 from my fee.
    My agent charges VAT on this commission (20%S) of £20
    Total deductions of £120.

    My agent sends me a statement detailing the payment of my fee and the deductions made and then transfers a net payment of £880 to my bank.

    SIX weeks later the TV company eventually pays the VAT of £200 to my agent. My agents forwards this money to my bank along with a statement confirming the payment.

    So any help on the correct way to record either of these scenarios would be very much appreciated.
    Thanks again,

    1. Hi
      I think your question goes beyond the brief of this post. We would be very happy to advise you as to how best to set up QB to record your income and expenses. Please get in touch via the Contact Us page or email [email protected]. We look forward to hearing from you.

  23. I just purchased Quickbooks online but am struggling to set up VAT for Ireland and have VAT 3 return enabled
    Can you help?
    Thank you

    1. Hi
      I am not familiar with Ireland’s VAT regime so probably wouldn’t be much help to you except in the most general terms. I suggest that you get hold of intuit Ireland – assuming it exists – by calling the QuickBooks helpline. They should be able to guide you through the set up process so that QB is tracking your VAT correctly.

  24. Which code do I use in QB for a sale of a service to a EU business? WE are UK VAT registered.
    I think I should use code 0.0% ECS but that records the sale against box 6 in the VAT return not box 8?

  25. Hi

    I have just started using QB and pay for lots of parking charges and purchases on a credit card. I have seen the credit card amount and can break this down manually in the purchase but some items, such as parking i am charged VAT for the text message but not for the parking itself. Any idea if vat amount can be manually entered. For example i have a credit card total of £472.37 and the VAT reclaimable is £2.28.


    1. Hi
      Thanks for your question. If I understand you correctly there would be two ways of dealing with your issue.
      You can Split a transaction: if you are looking at the banking screen, when you open the transaction you will see Split on the right hand side, beside Add. If you click on this you can add multiple lines to your transaction – in this case, one line posted to Travel with VAT Exempt, another line also posted to Travel with 20%S VAT.
      Alternatively you could Add an expense with VAT inclusive at 20%S, then Edit it to change the breakdown. To go back to a transaction you’ve just entered, click on the Search box at the top of the screen and you will see a list of recent transactions. Click on the one you’ve just added, change the setting to VAT Exclusive, then change the Amount to the full net amount of your parking expense with 20%S VAT, and adjust the amount of VAT in the VAT box below Subtotal so that the full total matches your receipt.

  26. I registered for VAT on 1st Apr 2019 but I have still have stock that I bought in the UK (and Paid VAT on) before registering. How do I enter this in QuickBooks Online to claim back the VAT? I have only just started using QuickBooks so don’t have any pre April 1st entries.

    1. Hi
      I don’t believe you can account for VAT on purchases made before your VAT registration – sorry! The stock asset itself would need entering as an Opening Balance along with the OBs from your previous year’s trading. Your accountant should be able to help you by providing a Trial Balance.

  27. we have purchased goods from outside the EU.
    Do I use the Reverse Charge code?
    I know we will pay zero taxes, because we will have vat in sales and in purchases, but it is not clear which code I need to use when I book this purchase invoice. We have also an invoice from UPS with the prepayment of the vat. that is booked correctly in QB.

    1. Hi
      You’ll see that I’ve discussed this in some detail in response to an earlier question – in short the correct code should probably be 20%RCSG (the 0% code being for selling). This code applies the tax shift.
      For the VAT payment to UPS I suggest a VAT only expense – I give 2 ways of doing this in response to David earlier.

  28. Hi
    I have signed up for s free trial with auto entry to use with QBO. When I post my invoices manually I post inclusive of Tax when a invoice comes from auto entry it posts exclusive of Tax. My QBO is defaulted to inclusive of Tax so it’s strange that the auto entry comes in as exclusive of tax. I have also tried receipt bank same thing it posts exclusive of tax, my question is if I am posting some of my invoices inclusive of tax and some are posted exclusive of tax does that matter or will it cause problems on VAT returns or should I default QBO to exclusive

  29. Hi,
    Is a VAT refund categorised under “other income”?
    What VAT code do you put this VAT refund under? Thinking it should be Exempt but the Exempt (sales) then has it show up in the “net value of sales” in my VAT return which doesn’t seem correct- although neither does having it in net purchases?


    1. Hi
      I assume you mean a VAT rebate from HMRC. If you deal with VAT payments and refunds correctly you will not need to post it anywhere. You need to spot the payment/ refund in the banking screen, then go to VAT screen (Taxes>VAT) and click on Record Payment or Record Refund beside your submitted return. Make sure the Bank a/c is correct and the date of the payment/ refund. There will then be a match on the banking screen.
      If you haven’t been doing this it would be sensible to unmatch your earlier VAT transactions, delete the underlying expense/ deposit, then do the above matching from the banking screen as you go, then re reconciling.
      It’s important to understand that when you submit a VAT return QB moves the balance in the VAT Control a/c to the VAT Suspense a/c; when you record your payment/ refund as I describe above it correctly clears the VAT Suspense a/c – which should be at £0 for most of the time. You’ll know if you’ve been doing it wrong if the VAT Suspense a/c has a working balance.
      All tax transactions are No VAT – ie outside the scope of VAT. Same goes for payroll etc.

  30. Hi the company that I work for is VAT registered. Our trout food supplier used to be in the UK, so VAT code 0.00% Z was used for the trout food. The company has moved has now moved from the UK to France, so we are now billed direct from France. Their invoices are showing VAT as 0.00% VAT code 3 but I am unable to find anything in QBO that seems relevant. I would be grateful for any advice please. Many thanks

    1. Hi
      So – currently – your purchase is an acquisition from another EU country. See other comments on this page to explain this. The supplier is applying a 0% code, so it us up to you to both collect the tax and pay it (a reverse charge). The correct code for this will be 20%ECG. To find out which boxes this posts to download the helpsheet which you can find on this page.

  31. I can’t find or I find it difficult to answer my questions from QB’s online so please help!
    I’m in UK as a supplier.
    What online QB’s code should I use for –
    1/ customers in EU VAT registered 20.0% ECG (0%) ?
    2/ customers in EU NON-VAT registered S (20%) ?

    1. You’ll find a link on this page to take you to a helpsheet for the various VAT codes and the boxes they post to in the VAT return. It would be helpful to print it out for future reference.
      In short, for EU customers who are VAT registered you should use 0%ECG (goods) or 0%ECS (services). If they are not evidently VAT registered you should use a standard code (20%S).
      You can read the explanation for these in my response to earlier questions. I cannot tell you what the correct code should be after 31 Jan at the moment!

      1. Thanks for this, I didn’t read all the page as I’ve seen QB’s chart but still didn’t understand it

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