Zoho Inventory

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:


When you create a New Organisation, choose your country as the United Kingdom to make use of this feature.

VAT Terms

HMRC: Her Majesty’s Revenue and Customs

Sales to Countries Outside UK:
Purchases from Countries Outside UK:

Setting up VAT in Zoho Inventory

VAT Settings

To start setting up your VAT in Zoho Inventory,

Accessing VAT

VAT Settings page

VAT International trade

Complete VAT page

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:

VAT preferences

Important! Thought this can be configured at any point of time, please stick to one choice inorder to ensure precision and accuracy when it comes to reports and accounting.

Managing VAT Rates in Zoho Inventory

Adding VAT Rates

To create or add a New VAT rate:

Accessing VAT

VAT rates page

New VAT pop-up

Editing a VAT Rate

To edit a VAT rate,

Accessing VAT

VAT rates page

VAT edit option

Edit VAT pop-up

Deleting a VAT Rate

To delete an existing VAT rate, follow the steps below:

Accessing VAT

VAT Rates page

Delete option for VAT

Delete confirmation pop-up

Contacts & VAT

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.

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

Items and their association with VAT

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.


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

For sales (Invoices, and Sales Orders) that are made outside the UK, you have to specify the VAT involved by yourself. For Contacts having currencies other than GBP, an Exchange Rate field is provided for you to enter the rate and the value will be calculated.

sales to a customer outside UK

Sales to EU-VAT Registered Customers

If you are selling a product or a service to your customer who is a part of the EU and VAT Registered, then the VAT can be Zero-Rated or a Zero Rate (0%) VAT is charged on your export.

sales to a EU-VAT registered customer

VAT in Purchases


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

purchases from a vendor within UK

Purchases from Outside UK

For purchases that are from outside the UK, you can select the VAT or the reverse charge involved to have it reflected on the purchase transaction.

purchases from a vendor outside UK

Purchases from Non-EU Countries

For the Non-EU Countries, VAT for goods and services associated with the goods are called as Import VAT. This import VAT comes under Input VAT.

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.