Are Tax codes needed on payments against Invoices

I am in the UK, and charge VAT at 20% - so on the Sales Invoice I select the “VAT 20%” tax code for each line item. This all works as expected, and I get a tax summary which totals up the VAT tax liability correctly.

When I enter the payment received against this invoice, it is possible to again select a tax code of “VAT 20%” on the payment line items to accounts receivable against this invoice. Is this necessary? I can’t see anything it affects so I’m inclined to leave it out, however I wanted to check there wasn’t something I’m missing!


Absolutely leave it out. VAT is credited for your purchase, recorded on the purchase invoice, not the payment, which is not a creditable event.

Now, if you purchase directly via a payment, without the purchase invoice, you would apply the tax code.

Thanks for confirming! I will leave it out. I had actually forgot the use case of doing it directly via a payment, which makes sense why it’s there as an option.