Change your VAT registration status

Your organisation will be registered for VAT by default in Xero. You can change this if you are not registered for VAT.

Important points about changing your VAT registration status

  • Only make these updates if you fully understand the necessary VAT requirement for all accounts within the chart of accounts. If you're not sure, check with your accountant or bookkeeper.
  • You might like to use a lock date to avoid accidentally entering transactions for the period before your registration change.
  • Changing your VAT registration status will update your chart of accounts. You might like to export a record of your chart before you make any changes.

Currently not VAT registered and becoming registered

Ensure that this process is followed only after all transactions dated before the VAT registration date are fully accounted for. If you have entered transactions for the period after the date of registration, you'll need to void these and re-enter them to include the correct VAT treatment after completing the steps below.

If your organisation with Xero was previously not VAT registered and is becoming VAT registered, you'll need to make the following changes within Xero.

  1. Update your VAT status in Settings > General Settings > Financial Settings. Change your VAT Scheme from 'None' to the appropriate option.

    If you're an accountant or bookkeeper with a client on Xero's Cashbook, you'll need to change their pricing plan to VAT Cashbook to allow their organisation to generate VAT Returns.

  2. Your chart of accounts won't have VAT applied. Before entering any transactions into Xero for your first VAT period, you need to edit each account to update the default tax setting on each so that it has the correct VAT treatment, instead of No VAT. If you are signed into Xero you can look at Xero’s default chart of accounts for a VAT-registered company for guidance. Although your accountant or bookkeeper may have specific VAT requirements for your accounts.
  3. If you have any:
    • Bank rules
    • Repeating invoices or bills
    • Repeating journals
    • Draft invoices or bills not yet processed
    you’ll need to update the tax option currently set on each line item.

You can now begin to use Xero as VAT-registered and you'll see VAT Return reports in All Reports under the Reports menu. Any existing transactions already entered into Xero will not be affected by this change – you’ll still be able to see them and include them in reports.

Change a number of chart of accounts codes at the same time

Talk to your adviser about updating many VAT chart of account codes at once.

Read the help for advisers on updating many accounts in your client's chart of accounts at once.

De-registering for VAT

Ensure that this process is followed only after all VAT transactions are accounted for and returns filed while being VAT registered. You won’t be able to complete a VAT Return in Xero after you have changed your organisation's VAT registration.  If you have entered transactions including VAT since the date of de-registration, you'll need to void these and re-enter them after completing the steps below.

If your organisation is de-registering for VAT, you only need to follow Step 1 above to change your VAT registration status to the ‘None’ option.

  • All accounts in the Chart of Accounts will be automatically updated to have the tax option No VAT.
  • The VAT Return reports will no longer be available in Xero.
  • If you have any:
    • Bank rules
    • Repeating invoices or bills
    • Repeating journals
    • Draft invoices or bills not yet processed
    you’ll need to update the tax option currently set on each line item to No VAT.
  • Any existing transactions already entered into Xero will not be affected by this change – you’ll still be able to see them and include them in reports including VAT account and amounts which are retained for reporting purposes.