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Working with Tax Codes

For US companies please see Working with US Sales Tax.

For UK companies Tax Codes represent those codes defined by HMRC for VAT on sales and purchases. A set of pre-defined Tax Codes and associated rates in line with those issued by HMRC, is loaded in your system.

These Tax Codes are applied to Line Items on Transactional Documents such as Sales Invoices or Bills, as seen below.

Tax Codes applied to Line Items

Tax Codes applied to Line Items

Each Tax Code has an associated Tax Rate, which defines the % rate at which VAT will be charged on Transactional Documents.

How to create new Tax Codes

  1. From the Explorer click Accounting->Tax->Tax Codes.
  2. This displays the current List of Tax Codes.
  3. From the Action dropdown click ‘Create New
  4. A new Tax Code Document will display (as shown below).

New Tax Code Document - UK

New Tax Code Document – UK

5. Give a name to the new tax code.
6. Add a description.
7. Choose the associated Tax Authority from the Dropdown.
8. Add the Associated Tax Rate.
9. Select the checkbox if it is a European Community Code.

Trading with other European Union Countries (EC Member States)

If you are a UK company trading with Companies from other countries in the EU, and they are registered for VAT, then they may have their own Tax Codes.

For these codes tick the checkbox ‘Is a EC Code‘. This enables the VAT Return to be completed correctly for transactions with other EC Member States.

If you are purchasing goods from a Supplier, and the Supplier is VAT registered and from an EC Member State, make sure to check the ‘Is from Other EC Member State‘ checkbox on the associated Supplier Document.

Trading with other EC Member states may incur zero VAT, however the trading figures still need to be recorded on the VAT Return (i.e. the VAT100 form, boxes 2, 8 and 9).

Also Read About

Working with Customers
Working with Suppliers
Working with Tax Authorities
Working with HMRC (UK Specific)
Working with VAT Returns