When I file my VAT returns, there are three main categories I need to detail:
- Declaration of output tax (sales)
- Change of use of goods (such as writing off inventory items as business expenses)
- Input tax claim (purchases, with imported goods being a sub category of this)
Several of the reports available under Tax Codes offer useful ways of getting what I need for categories 1 and 3, but it takes some effort to separate out the information that I need for category 2, usually involving some manual arithmetic once I’ve picked out the inventory write-offs from the sales invoices. I’m worried that my current methods are more prone to error on my part, as well as being more time-consuming.
So, I’m thinking of creating a new custom tax code with the same rate as the standard VAT, and using this for all the transactions that would fall under category 2 above. It would make it much quicker and easier for me find the information I need for my returns. The 100% “VAT on import” code I use makes it easy to see the details of my imports, and something like a “VAT 14.5% change of use of goods” code would similarly help me separate these transactions from regular sales.
So, my question is, is this a reasonable use of a custom tax code, and is there any reason I shouldn’t be doing this? I’m wondering if there could be implications beyond what I’m seeing in my reports.