Tax codes

For any transaction within Augtool, that affects your VAT, a Tax Code or Multiple Tax Codes need to be setup. This is done under the Business Unit >> Fiscal setup tab. 

Each VAT code needs to be linked to a Chart of Accounts Account which is normally called a VAT Control Account. There is normally only one of these accounts that holds all the VAT. This VAT control account will not necessarily balance with your VAT Report due to the complications around timing - backdated and future dated transactions - that would either be included or not included in your VAT report. 

Every transaction that uses a Tax Code will post its VAT implication to this VAT Control Account. Augtool also keeps a separate ledger of VAT transactions linked to its specific VAT code which is used to generate your Vat Report and to show you the detail of each VAT implication based on its respective Tax Code. 

In many industries, certain products need to apply a different tax percentage to the transaction. In Augtool every product (and for that matter every item) is setup with its default Tax Code (and therefore its default VAT percentage). In many industries, tax on certain items based on who you are transacting with also require a different tax code.

You may not want to change the default Tax Code on an item based on who you are transacting with (or for that matter, you may forget and post an incorrect transaction). Tax Codes have purchase and sales override features that work in conjunction with the Organisation's VAT setting under the Organisation's billing tab.

To create overrides for Tax Codes to deal with this you would need to do the following: 

• Set a Tax Code to have a non-VAT or Foreign Exempt sales or purchase override flag AND;

• Flag the Organisation as either a non-VAT Vender or Foreign Company under its billing tab

Once this has been done, any transaction that is created against this Organisation will know that it is transacting with either a non-VAT Vendor or a Foreign Company. The system will then look at the Tax Codes in your system and find the Tax Code with the Non-VAT or Foreign Exempt override set, and rather apply this Tax Code to the line items you enter.