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Value Added Tax(VAT) - U.K.

VAT - Value Added Tax. According to HMRC, VAT is a tax that is charged on most goods and services that VAT registered businesses provide in the UK. It is also charged on goods and some services that are imported from countries within and outside the European Union (EU).

Guide Layout:

VAT Terms

HMRC: Her Majesty’s Revenue and Customs

Sales to Countries Outside the UK

Purchases from Countries Outside the UK


Setting up VAT in Zoho Inventory

To set up VAT in Zoho Inventory:

  1. Go to Settings, then VAT.
  2. Open VAT Settings.
  3. Select Yes if your business is registered for VAT and enter your VAT Registration Number from your HMRC certificate.
  4. If you take part in international trade, then check the box near International Trade.
  5. Click on Save.

Important Note: If your Zoho Inventory account is integrated with Zoho Books, your VAT settings in Zoho Books will be automatically reflected here.


VAT preferences

Depending on how you operate your business you can choose to charge your item prices either inclusive or exclusive of VAT. To do so:

  1. Go to Settings, then Preferences.
  2. Under General preferences, choose whether your item rates should be inclusive or exclusive of VAT.
  3. Click Save.

VAT preferences

Important! Though you can change your preferences at any point of time, we recommend you to please stick to one choice to ensure precision and accuracy when it comes to reports and accounting.


Managing VAT Rates in Zoho Inventory

Adding VAT Rates

To add a VAT rate for a EU country where you sell digital services:

  1. Go to Settings, then VAT.
  2. Open the VAT Rates tab.
  3. Click the + New VAT button on the top right corner.

    New VAT
  4. Enter the VAT Name, i.e: Austrian VAT or Belgium Reduced VAT.

  5. Enter the VAT Rate(%) for the EU member country.

  6. Select the country from the EU Member State drop down provided.

  7. Click Save.

    New VAT Details

Editing a VAT Rate

To edit a VAT rate:


Deleting a VAT Rate

To delete an existing VAT rate:


VAT Treatment in Contacts

You can configure your customer’s VAT treatment at the time of creating a contact in Zoho Inventory. You can learn more about how to create a contact, by clicking here.

During the contact creation process, except for the way the taxes are associated and handled for a customer, everything else remains the same across different country specific editions of Zoho Inventory. Hence, we are going to focus solely on how you can configure and associate VAT to a customer.

Note: Post Brexit (i.e. from 1 January 2021), the tax treatment for all the customers outside the UK will be considered as Overseas. Therefore, UK VAT MOSS will not be applicable when digital services are provided for businesses that are located outside the UK. Instead, you can register for the Non-Union VAT MOSS scheme in an EU member state or register for VAT in each EU member state where you supply digital services.

Contacts VAT section

Enabling VAT Treatment

VAT Treatment Description
United Kingdom
This option is for your customers who are based in the UK and can have transactions only in GBP. VAT treatment for United Kingdom
EU - Non VAT Registered
This option is for your customers who belong to the European Union and are not registered for VAT. VAT treatment for EU - non VAT registered contacts
EU - VAT Registered
This option is for your customers who belong to the European Union and are registered for VAT.
Enter the VAT registration number of the contact.
Choose the Country Code from the drop down provided and enter the registration number in the box.
It is important for you to enter the VAT registration number of your customer, as it is required while submitting the EC Sales List.
In order to zero rate the sales for a EU customer who is VAT registered, HMRC requires your customer’s VAT registration number to be shown in invoices. VAT treatment for EU - VAT registered
Non European Union
This option is for your customers outside the European Union. VAT treatment for non European Union

Note: VAT Treatments can also be associated with vendors.

VAT in vendors


VAT in Items

Associating VAT to items during creation


VAT in Sales

VAT is included in both the sales and purchases for your business. There are different methods in which VAT is calculated on sales, according to the region and VAT treatment of your customers and vendors.

In Zoho Inventory, VAT treatment of your contact is taken into account and the VAT associated with the item is automatically populated. Making it simple for your order management purposes.

Sales

For creating a sales(Invoices or Sales Orders) transaction that is within the United Kingdom,

Choosing VAT rate for an Item added to a sales transaction

Options to configure VAT for a customer at the transaction level


Sales Outside UK

sales to a customer outside UK

Sales to EU-VAT Registered Customers (NI Protocol)

If you’re a business in Northern Ireland and you are selling goods to a customer who is in the EU and is registered for VAT, then the VAT can be Zero-Rated or a Zero Rate (0%) VAT can be charged on your export. To do this, you’ll have to enable the NI protocol from VAT settings and select the VAT treatment as EU-VAT registered (NI Protocol) for the customer.

sales to a EU-VAT registered customer

To enable the NI Protocol in your organisation:

  1. Go to Settings > VAT > VAT Settings.
  2. Mark the Enable trading of goods between Northern Ireland and the European Union (NI Protocol) checkbox.
  3. Click Save.

VAT in Purchases

Purchases Within the UK

For creating a purchase(Bills and Purchase Orders) transaction that is within the United Kingdom:

  1. Select the customer whose VAT treatment is for the United Kingdom.
  2. Add the item for which you are creating the purchase transaction.
  3. Select the VAT amount.

purchases from a vendor within UK

Purchases from Outside UK

purchases from a vendor outside UK

Purchases from Non-EU Countries

purchase from a vendor belonging to a non EU country

While creating a purchase transaction for a vendor who is from a non-EU country, the VAT field will not be editable. Thus the import VAT cannot be added for the transaction on the bill or purchase order created.

To record the import VAT, a manual journal entry in the integrated Zoho Books organization(the same organization in Zoho Books) is needed.

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