Record VAT payments to or refunds from HMRC

Record payments to or refunds from HMRC, and reconcile them to the right accounts in Xero.

Payments to HMRC

Record a payment to HMRC by either:

  • Creating a spend money transaction when you reconcile the payment in your bank reconciliation. Select the VAT account (820 - VAT in the default chart of accounts).

    Image showing spend money transaction for VAT payment.

  • Adding a bill in Xero when you complete your VAT Return. Select the VAT account (820 - VAT in the default chart of accounts). Match the bill with the payment when the payment appears in your bank reconciliation.

    Image showing VAT payment due added as bill.

Refunds from HMRC

Record a refund due from HMRC by either:

  • Creating a receive money transaction when you reconcile the receipt in your bank reconciliation. Select the VAT account (820 - VAT in the default chart of accounts).

    Image showing refund as receive money transaction.

  • Adding an invoice when you complete your VAT Return. Select the VAT account (820 - VAT in the default chart of accounts). Match the invoice with the refund when the receipt appears in your bank reconciliation.

    Image showing VAT refund as invoice.

If you have fees, interest or penalties with your payment or refund, code these items to a separate income or expense account. Don't code them to the VAT account. You'll need to account for them separately from your VAT liability. Consult your accountant or bookkeeper if you're unsure.