Setting Up UK VAT — End to End

This article is about configuration, not arithmetic. It shows how to set up REDA’s tax data for the UK so that VAT (Value Added Tax — the UK’s consumption tax on goods and services) is then calculated correctly on its own — every time, with no decision at invoice time. We’ll work a small catalogue of real products and services that span all four UK VAT treatments, configure the chain that makes each one behave correctly, and finish by posting a sale to prove the setup is right.

The configuration chain

Here is the whole chain, in the order the engine consumes it — and who provides each part:

Our example catalogue — one of every VAT treatment

To make the setup concrete, we’ll configure these six items. They deliberately cover every UK VAT treatment, because this is the decision an admin actually makes — which treatment does each thing I sell attract?

Step 1 — Jurisdictions

UK VAT is national, so the rules anchor to the country jurisdiction GB. The seed creates GB plus England, Scotland, Wales and Northern Ireland (the last for the Windsor Framework). You don’t add anything here — just confirm GB exists and is active.

Step 2 — Tax Types

Four VAT types ship, distinguished by rate band and — crucially — recoverability:

That Is Recoverable flag is the one that, on a purchase, sends the VAT to a reclaimable asset (standard/reduced/zero) or sinks it into cost (exempt). It’s a property of the tax, set once, here.

Step 3 — Tax Profiles (the treatment buckets)

A Tax Profile is the bucket you drop a product into. The UK seed ships exactly four — one per treatment. These are the only four choices you make per product in Step 5:

Step 4 — Tax Rules (profile → rate)

A Tax Rule connects a profile to a rate within a jurisdiction. One rule ships per treatment — each carries a Tax Profile condition and a Destination Jurisdiction of GB, so it only fires for that bucket on a UK supply:

You rarely touch these — they’re the rate book. The link between a product and its rate is made entirely by the profile you assign next.

Step 5 — Classify your catalogue (the real work)

This is the step that’s actually yours. For each product or service, create a Product Fiscal Profile that links it to the right Tax Profile. Do this once per product, and every future invoice gets the right VAT automatically. Our catalogue:

Step 6 — Party Tax Profiles

Who the buyer and seller are can change the answer. The UK seed ships three party profiles; assign the right one on your entity and on each Account:

For standard UK VAT none of the four rules above filter on the buyer, so a B2B and a B2C sale attract the same VAT — but the profile is still where status like FRS is recorded, and it’s the hook other countries use for buyer-specific rules.

Step 7 — GL mappings

The mapping decides which account each VAT amount lands in. Seven mappings ship for the UK — a Sales mapping for each of the four VAT types, plus a recoverable Purchase mapping for the three reclaimable ones — but they all point at just two accounts:

These ship pointed at the seeded UK tax accounts. If you keep your VAT in your own GL accounts, re-point the mappings there — that’s the one edit most businesses make.

Step 8 — Register your entity & set defaults

The payoff — the setup calculates itself

With the chain in place, you make no tax decision at invoice time. Sell each catalogue item for £1,000 to a UK customer and the configured data produces the right answer:

The full journal for the consulting sale — produced entirely by the setup:

The purchase side — reclaiming input VAT

The same configuration drives purchases. A supplier bills you £500 + 20% VAT; because the VAT Type is recoverable and the purchase mapping points at an asset, the £100 lands in 1511-VAT-ITC-GB (reclaimable) rather than expense:

Buy something that relates only to exempt sales and the VAT Type’s Is Recoverable = No sends that input VAT into cost instead — again, decided by the setup, not at entry time.

If VAT doesn’t appear, check the chain

Because the answer comes from the data, a wrong answer means a gap in the data. Check, in order:

1. Registration (Step 8) — is the entity registered at GB, active, with effective dates covering the invoice date? No registration → no VAT, by design.
2. Classification (Step 5) — does the product have a fiscal profile (or Apply Default Tax + a catch-all rule)? Neither → zero tax.
3. Jurisdictions (Step 1 & 8) — are both the entity’s and the customer’s Tax Jurisdiction set?
4. GL mapping (Step 7) — if posting fails, a tax has no account for its Side; add the mapping.

Where to go next

1. US Sales Tax & Nexus — a different taxing principle to compare.
2. India (GST + TDS) — a multi-component country next.
3. Tax Jurisdictions — the UK jurisdiction behind the setup.
4. Tax Rules — how the standard-rate rule is built.
5. Tax Seeding Wizard — load the UK rulebook in one click.

Frequently asked questions