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VAT Return

Cash based and Standard VAT schemes in the UK. The only information that this will affect is the production of the quarterly VAT return. Data is stored in the same way for both VAT schemes.
Flat Rate VAT scheme in the UK (FRV). For more details on the Flat Rate scheme, see the HMRC information.

The choice of Standard or Cash based does not affect your day-to-day transactions, it only affects what is shown on the VAT return. Since Brightpearl uses transaction based VAT reconciliation (rather than period-based), changing between Cash based or Standard based VAT is easy to manage.

Learn more about setting up tax

VAT Return

If your system is set to use Flat Rate VAT, then Brightpearl will use the Flat Rate VAT return screen. Procedure is the same as for non flat rate scheme.

Note that you will need to calculate the value of Box 2 manually since Brightpearl will allocate all Purchase Invoice tax to the FRV adjustment code. Using the advanced filters in the General Ledger report it's easy to find out the total net value of any EC purchases on T7 or T8 tax codes should you need to.

For more information on VAT and filling out your return, please consult your accountant!

Use Brightpearl to produce your VAT returns. If you have entered information correctly for each sale, processed refunds correctly and entered invoices properly, then the VAT return is a simple operation.

Before producing your VAT return you should enter all transactions into Brightpearl and reconcile all bank accounts up to the end date of the VAT period.

Go to Accounting > VAT Return.
Select dates as shown on your paper VAT Return.
Choose whether to include reconciled transactions in the current period. *
Choose whether to include unreconciled transactions prior to the chosen period. **
Choose whether to display a detailed report.
Click Submit to show what you owe.
Copy the numbers to your paper VAT Return.
Click Reconcile VAT Return to mark all the include transactions as reconciled for VAT. This means that they will not be included on a future VAT Return unless you specifically choose to "include current reconciled" when you run the VAT Return again.

It's a good idea to display and print a copy of the detailed report for your records before you reconcile the VAT transactions.

* Transactions that have already been reconciled for VAT using the VAT Return page. The normal setting for this option should be no.
** The normal setting for this option should be yes. This will include transactions with a date during any previous VAT period that have been entered into your accounts since the last VAT report was produced.

Cash Based Flat Rate VAT

Brightpearl will include all transactions on the Sales Tax account for invoices that are completely paid in full, that have not been reconciled on a previous VAT return. Each Sales Tax entry will be at the Flat Rate active at the time, so this method will account for changes to the FRV rate in the middle of an accounting period. Note that if you part pay a Sales Invoice, the VAT component will not show until the invoice is cleared in full.

Standard (Accrual/Revenue) Based Flat Rate VAT

Brightpearl will include all transactions on the Sales Tax account for the period selected, regardless of whether the invoice has been cleared. The only transactions that should be adding to the Sales Tax accounts are Sales Invoices, Sales Credits and manual Journal entries.

Reconciling Your VAT Return

When you are happy with the numbers that display on your VAT Return, print 2 copies then click the Reconcile VAT return button. A journal will be created to transfer the VAT payable from your Sales/Purchase Tax accounts into your VAT liability account. This will mark each transaction as reconciled. Once a transaction has been reconciled for VAT you will not be able to change it. It is good practice to ensure that all Brightpearl bank records have been reconciled with the bank statements for the VAT period first to reduce the chance of errors.

Paying Your VAT

Simply create a Bank Payment from your bank account into the VAT liability account. If you are receiving money from HMRC, then create a Bank Receipt. When you make a bank transfer to the Inland revenue, or write a cheque for the VAT amount, enter a Bank Payment to the VAT liability account. The balance of the VAT liability account should be the same amount as you are paying. To check the balance of the VAT liability account, view the Trial Balance.

Standard (Revenue/Accrual Based) VAT

For the Standard VAT scheme, the VAT Return displays relevant tax for all invoices on their invoice date, regardless of whether they have been paid or not. The totals are calculated from the transactions on the Sales Tax control account, and the Purchase Tax control account.

Cash Based VAT

For Cash-based VAT scheme users, only Invoice transactions that have a payment allocated against them will be included. Brightpearl will pro-rata any part paid Sales and Purchase Invoices. Bank Payments and Bank Receipts with a tax component will be regarded as Cash transactions and will be included on the VAT Return.