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GST/VAT/Tax

These preferences determine if you want MoneyWorks to track your GST/VAT or Sales Tax, and (for GST and VAT), the length of your GST/VAT cycle—this is required for the GST Report (but not for Sales Tax reporting, which is normally done using the Sales Tax report). Before you print your first GST/VAT report, you will need to specify the end date for your first GST/VAT cycle. Thereafter, MoneyWorks will recalculate the next cycle end date using the cycle length specified.

Note: MoneyWorks Cashbook only supports GST on a payments/cash basis.

For an outline of the way in which these settings are used to generate your GST/VAT returns —see GST, VAT, Sales Tax & Tax Codes.

I need to account for GST/VAT/TAX This option must be on if MoneyWorks is to track your Tax. If it is not set no Tax tracking will be done—the Net, TC and Tax fields in the detail lines of transaction entry will be replaced by a single Amount field1.

Income Click Payments or Invoice Basis to indicate whether GST on your income is payable on invoice (accruals basis) or when the payment is received (cash basis).

Expenses Click Payments or Invoice Basis to indicate whether GST on your expenses is payable on receipt of invoice (accruals basis) or when the payment is made (cash basis).

Tax Cycle Click the radio button to identify your Tax return cycle frequency.

Next Cycle ends on Enter the last date of the next Return cycle into the edit box. This date is used to identify the transactions to be processed for the GST/VAT return.

PPD (Prompt Payment Discounts)

The handling of the prompt payment (or settlement) discounts differs by country. If you are giving or receiving prompt payment discounts, you need to ensure that it has been correctly set up for your local requirements.

When a prompt payment discount is taken, MoneyWorks creates a credit note to account for the discounted amount. This is coded to a nominated “Discounts” general ledger code. It is important that the GST/VAT/Tax code on this account has the appropriate GST/VAT/tax handling for your region.

Discount applies to both Net and GST if paid by discount date The case for most jurisdictions, the tax is a straight percentage of the amount paid, regardless of whether the prompt payment discount is taken up or not. The general ledger code should be taxable (see example 1a below), unless it is being treated in a similar manner to a finance charge (example 1b). If in doubt, you should check with your accountant.

Discount applies to Net only; Tax is not discounted For the USA and Canada, the tax is calculated on the full value of the invoice, and is not reduced by paying early. The Discount general ledger account should be exempt of tax (example 2).

Discount applies to both Net and VAT; VAT is always discounted This was the situation in the UK prior to April 2015. For the UK, the VAT is calculated on the discounted amount of the invoice, regardless of whether the discount is taken (which gives rise to some extremely weird arithmetic). The Discount general ledger account should be exempt of VAT (example 3).

To illustrate how the settings work, we will assume an invoice for $100 plus tax at 10%(i.e. a theoretical total of $110) with a 10% prompt discount rate.

ExampleDiscount TakenDiscount Not Taken
1aInvoice Amt: $110 ($100 + $10 Tax)
Amount to Pay: $99 ($90 + $9 Tax)
Credit Note Raised: $10 + $1 Tax
Total Tax: $9
Invoice Amt: $110 ($100 + $10 Tax)
Amount to Pay: $110 ($100 + $10 Tax)
No credit note raised:
Total Tax: $10
1bInvoice Amt: $110 ($100 + $10 Tax)
Amount to Pay: $99 ($89 + $10Tax)
Credit Note Raised: $11 + $0 Tax
Total Tax: $10
Invoice Amt: $110 ($100 + $10 Tax)
Amount to Pay: $110 ($100 + $10 Tax)
No credit note raised:
Total Tax: $10
2 (USA, Canada)Invoice Amt: $110 ($100 + $10 Tax)
Amount to Pay: $100 ($90 + $10)
Credit Note Raised: $10 + $0 Tax
Total Tax: $10
Invoice Amt: $110 ($100 + $10 Tax)
Amount to Pay: $110 ($100 + $10 Tax)
No credit note raised:
Total Tax: $10
3 (UK) pre Apr 2015Invoice Amt:: £109 (£100 +£9 VAT)
Amount to Pay: £99 (£90 + £9 VAT)
Credit Note Raised: £10 + £0 Tax
Total Tax: £9
Invoice Amt:: £109 (£100 +£9 VAT)
Amount to Pay: £109 (£100 + £9 VAT)
No credit note raised
Total Tax: £9

1  MoneyWorks versions prior to 5.2 had a Use two-tier GST option for the Canadian version. This has been replaced with the Composite tax.