Things to check when completing your VAT Reconciliation report

Review these items when you're balancing your VAT Reconciliation report for standard VAT.

Have you completed the VAT Return check?

We recommend you check these items when you complete your VAT Return, before you run the VAT Reconciliation report.

Is the conversion balance of your VAT account correct?

If you've converted to Xero from another accounting system, ensure your conversion balance for VAT is correct.

If this is your first VAT Return period in Xero, check you've entered all sales invoices, bills and expense claims outstanding at conversion date correctly in Xero.

Are the opening balances on your VAT Reconciliation report set to 0?

We recommend you set the From date on your VAT Reconciliation report so that all opening balances are 0. Keep the report in draft format and update it after you publish each VAT Return.

See our worked examples for guidance:

Complete your VAT Reconciliation report with a conversion balance

Complete your VAT Reconciliation report after you start with VAT

Do you have transactions using Reverse Charges in the VAT period?

The offsetting VAT charges created by using the Reverse Charge Expenses (20%) tax rate are not included in the VAT Collected and VAT Paid columns in the VAT Reconciliation report, but they are included in the Filed column of the report. This causes a variance in the Unfiled column.

To correct for this:

  1. Enter the amounts for reverse charges in the Adjustment boxes in the VAT Collected and VAT Paid sections of the report.
  2. Reduce the amount posted by Xero in the Filed column by this amount.

(Payments basis) Is your VAT Account Summary balance different from your VAT Account balance?

Your VAT Account Summary balance and your VAT Account balance on your VAT Reconciliation report won't match if you:

  • Make a payment on a bill in this VAT period when the bill is dated in a later VAT period.
  • Receive a payment on an invoice in this VAT period when the invoice is dated in a later VAT period.

Image showing VAT Account Summary balance different from VAT Account balance.

To adjust for this:

  1. Export your VAT Reconciliation report to Microsoft Excel or Google Sheets.
  2. Open the spreadsheet, then insert rows under the VAT Account Summary balance line.
  3. Enter the VAT component of the early payment.
  4. Add or deduct the early payment VAT component from the VAT Account Summary balance.

Image showing adjusted VAT Rec balance.

Your VAT Reconciliation report will correct itself at the end of the period in which your invoice or bill is dated.