From tax codes to a VAT return

What is this page about: How the tax tags on your tax codes roll up into the boxes of a VAT return, what has to be in place before you run one, and how to produce and file a return. The UK (HMRC) and Denmark (Skattestyrelsen) are used as worked examples.

# On this page

• How a tax code rolls up into a return box
• What has to be true before you run a return
• Produce and file a return
• Example: UK VAT return with HMRC
• Example: Danish VAT return with Skattestyrelsen
• Best practices
• Related articles

# How a tax code rolls up into a return box

A VAT return is built from the tax amounts your entity has already posted, grouped into the boxes or sections the tax authority expects. Tax tags on each tax code decide that grouping:

• Base report tag: set in the tax code's General section. This is the default tag for the code.
• Report tag: set on each posting rule. A posting rule is one line of a tax code that decides how a taxed amount is calculated and which account it posts to. Because the report tag sits on the posting rule, one tax code can split its tax across several boxes.

Light adds up every posted amount by its tax tag and maps those tags onto the boxes of the country's VAT return. The return reads what your tax codes have already tagged, so the figures in each box are only as good as the tags behind them.

For example: a 20% UK sales tax code with one posting rule tagged to Box 1 adds the VAT from every sale using that code to Box 1. If the code has two posting rules with different report tags, each portion of the tax lands in its own box.

# What has to be true before you run a return

• The entity's VAT number is set on the entity in Settings > Records > Entities. Filing without one fails with "VAT number is missing for the company entity".
• Tax codes carry the right tags. Every tax code used in the period needs a base report tag, and its posting rules need report tags, so posted amounts land in the correct box.
• VAT-bearing documents are posted for the period: bills, sales invoices and journal entries that used a taxed code.
• A connection to HMRC exists, for UK returns. Danish returns need no connection step.
• You have Company Admin permissions to set up the HMRC connection and file with HMRC.

# Produce and file a return

Light can file VAT returns with HMRC (UK) and Skattestyrelsen (Denmark). Filing with Skattestyrelsen is enabled per company, so if you don't see File with Skattestyrelsen, contact Light support.

The flow is the same for both. The filing drawer differs by tax authority.

1. Go to Planning & Reports > Reports and open the VAT system report for the country.
2. Set the entity filter to the single entity you're filing for.
3. Set the date range to the VAT period you're filing.
4. Check the box or section totals against the ledger.
5. Click File with HMRC or File with Skattestyrelsen.
6. Confirm the VAT period in the filing drawer.
7. Review the box table or section breakdown. For HMRC, also read the declaration text: the legal statement that the figures are correct to the best of your knowledge.
8. Click Confirm to submit.

Treat Confirm as final. Clicking Confirm sends the return to the tax authority straight away, with no second confirmation step. For HMRC this is a final submission. For Skattestyrelsen, Light sends a draft that you finalise on Skattestyrelsen's own site.

# Example: UK VAT return with HMRC

1. Go to Settings > General > Integrations and create the HMRC connection, selecting the Entity.
2. Go to Planning & Reports > Reports and open the UK VAT system report.
3. Set the entity filter to the UK entity and the date range to the VAT quarter.
4. Click File with HMRC.
5. In the Filing VAT report with HMRC drawer, choose a VAT period from the list of open obligations. Obligations are the VAT periods HMRC expects you to file, and Light retrieves them from HMRC.
6. Review the box table and declaration text, then click Confirm.

# Example: Danish VAT return with Skattestyrelsen

1. Go to Planning & Reports > Reports and open the Danish VAT system report.
2. Set the entity filter to the Danish entity and the date range to the VAT period.
3. Click File with Skattestyrelsen.
4. In the Filing VAT report with Skattestyrelsen drawer, check the VAT period. It is read-only and follows the date range you set on the report.
5. Review the sections Danish input and output VAT, International trade and Reimbursement of energy taxes, and the Total VAT payable / receivable line.
6. Click Confirm.
7. Click Open on Skat in the dialog that follows to see the filing on Skattestyrelsen's site, where you finalise it.

With HMRC you pick the period from a list of open obligations. With Skattestyrelsen the period mirrors the report's date range, so set the date range carefully before you click File.

# Best practices

• Set base and report tags on every tax code before you rely on it for a return. A code without tags won't add to any box.
• Reconcile the box or section totals against your ledger before clicking File, since the return reads whatever has already been posted with those tags.
• Keep entity VAT numbers current. A missing VAT number blocks filing.
• Save a copy of the box table before you click Confirm, and note the confirmation HMRC returns. Light shows it once and doesn't keep a record of the submission afterwards.

# Related articles

• Producing and reviewing the VAT return
• Filing, evidence and corrections
• The VAT clearing journal
• Tax and VAT Configuration
• Tax Compliance: HMRC (UK) and VAT
• HMRC Connection (UK)

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