The VAT 126 return is used to identify reclaimable VAT on supplier transactions for a selected period.
⚠️Important:
The VAT 126 must be generated once totals have been confirmed. If it is not generated, future VAT 126 and VAT Return reports will be incorrect.
VAT 126 processing is usually completed after period end.
When to use a VAT 126
You should only process a VAT 126 if:
the school is not VAT registered.
If the school is VAT registered, you must use the standard VAT Return instead.
Run the VAT 126 report (do not generate)
Go to Reports.
Select VAT.
Run VAT 126.
Set:
Period From to Period 0
Period To to the period you are running the report for
Click Submit.
Click Export to Excel.
⚠️Important: Do not generate the VAT 126 at this stage.
The VAT 126 must be run from Period 0 to ensure all supplier-linked transactions that have not previously been claimed are included.
Run the VAT Return for comparison (do not generate)
You must now run a VAT Return for the same periods.
Go to Reports.
Select VAT.
Run VAT Return.
Set:
Period From to Period 0
Period To to the same period used for the VAT 126
Click Submit.
Click Export to Excel.
Do not generate the VAT Return.
Compare VAT 126 and VAT Return totals
Compare:
the total on the VAT 126.
the total on the VAT Return.
If the totals match
If there is no difference between the two totals:
you can proceed to generate the VAT 126 and submit it to HMRC.
Resolve differences between totals
If there is a difference between the VAT 126 total and the VAT Return total, check the VAT Return for:
transactions posted with VAT but without a supplier
sales invoices posted with VAT
Incorrect VAT transactions
If VAT has been added incorrectly:
reverse the transaction.
repost it without VAT.
Correct transactions missing a supplier
If a transaction should include VAT and should have a supplier attached, you must correct it using a balancing expense.
To post a VAT correction expense
Go to Transactions.
Click Expenses.
Select Direct Debit Expense.
Click the plus icon to add a new expense.
Enter the details, including a Description explaining the VAT correction.
Add a Debit line:
use the same Cost Centre / Ledger Code as the original transaction
add the Supplier in the Contact column
Add a Credit line:
use the same Cost Centre / Ledger Code
do not add a Supplier
enter the same amounts
If the total value is £0.00, you can Save and Post the expense.
📌Note:
The net total and VAT must be the same on both lines.
For income or refund transactions, reverse the debit and credit entries.
Generate and submit the VAT 126
Once the VAT 126 and VAT Return totals match:
Go to VAT 126.
Select Period 0 to the required period.
Check the total figure.
Click Generate VAT 126.
Submit the generated report to HMRC.
After generation:
the transactions will not appear on future VAT 126 or VAT Return reports.
📌Note:
If you do not generate the VAT 126, all future VAT 126 reports will be incorrect.
If transactions still appear on future reports, the VAT 126 has not been generated correctly.
The VAT 126 can be processed at any time but is usually completed after period end.