Ensuring Correct VAT Setup

Created by David Joyce

Overview

This guide explains how to correctly configure VAT settings in Turbo, with a focus on inventory pricing, product-level VAT behaviour, cash receipts, and VAT reporting.

Correct VAT setup is not just about having the right VAT rate — it also depends on:

• Whether products are priced VAT inclusive or exclusive

• How VAT behaves for B2B vs B2C sales

• How VAT is calculated on cash receipts vs invoices

• Ensuring VAT data aligns with your accounts package

Key Concepts (High Level)

• The system has a default VAT pricing mode (inclusive or exclusive)

• Individual products can override the default

• You can enter prices as VAT inclusive or exclusive on the fly when invoicing

• VAT can be calculated:

  • When an invoice is posted, or

  • When an invoice is paid (cash accounting)

Step 1 — Check Your Default VAT Pricing Mode

From the dashboard, you can immediately see whether the system is set to:

• VAT Exclusive, or

• VAT Inclusive

This gives a quick visual confirmation of how products are generally priced.

Step 2 — Default System VAT Pricing Setting

1. Go to Settings & Tools.

2. Open Advanced Configuration.

3. Scroll to the bottom.

4. Locate Products selling prices are VAT exclusive.

What this setting does

• This controls the default pricing behaviour for new products

• If enabled, new products are created as VAT exclusive

• If disabled, new products are created as VAT inclusive

Important: Changing this setting does not update existing products.

Best practice

• Decide on your pricing strategy early

• Avoid switching this setting frequently, as it can confuse users and pricing expectations

Step 3 — Product-Level VAT Pricing Overrides

Even if your system is VAT exclusive (common for B2B), individual products can be set as VAT inclusive.

Why this is useful

• Retail / B2C products

• Mixed B2B and B2C environments

• Physical retail counters vs online stores

Example scenarios

• Online store prices include VAT, trade counter is VAT exclusive

• Retail items are VAT inclusive, wholesale items are VAT exclusive

Each product can override the system default without affecting other products.

Step 4 — Selling Products with Mixed VAT Behaviour

When creating an invoice:

• VAT inclusive products show a single total figure

• VAT exclusive products show net + VAT

You can sell both types of products on the same invoice.

On-the-fly price entry (very important)

When negotiating with a customer, you can enter prices in different ways:

• Enter a net price (VAT exclusive)

• Enter a gross price (VAT inclusive)

• Enter values like:

  • 500 + VAT

  • 500 inc VAT

The system will:

• Automatically calculate VAT

• Adjust net or gross values correctly

• Eliminate the need for manual VAT calculations

Step 5 — Changing Prices During Negotiation

You are not locked into product pricing:

• You can override prices directly on the invoice

• The system will always calculate VAT correctly based on:

  • Product VAT setup

  • VAT rate

  • Inclusive vs exclusive entry

This allows sales staff to:

• Agree prices verbally with customers

• Enter values quickly without calculators

• Maintain VAT accuracy

Step 6 — VAT on Cash Receipts (Cash Accounting)

Another critical setting is Enable VAT on Cash Receipts.

1. Go to Settings & Tools.

2. Open Advanced Configuration.

3. Locate Enable VAT on Cash Receipts.

What this does

• VAT is calculated when the invoice is paid, not when posted

• Required for businesses using cash accounting for VAT

If this is enabled:

• Some VAT reports will calculate VAT at payment date

If disabled:

• VAT is calculated at invoice posting date

Step 7 — Understanding VAT Reports

Go to Analytics → VAT Reports.

You will see multiple reports, including:

• VAT Summary

• VAT Detail

• Standard VAT Calculation

Report behaviour

• Standard VAT Calculation

  • Always calculates VAT based on invoice posting

• Other VAT reports

  • Follow the cash receipt setting

  • Calculate VAT when the invoice is paid (if enabled)

This distinction is critical when exporting or syncing data to your accounts package.

Step 8 — VAT Rates Setup

1. Go to Settings & Tools → VAT Rates.

2. Review existing VAT rates.

When Turbo is first set up:

• Default VAT rates for your country are preloaded

For each VAT rate you can:

• Edit the description

• Specify For Resale / Not For Resale

• Link VAT rates to:

  • Nominal codes

  • External accounting packages

Ensure VAT rates are correctly mapped before connecting accounts software.

Common Mistakes to Avoid

• Frequently switching VAT inclusive/exclusive defaults

• Not checking product-level VAT overrides

• Incorrect VAT on cash receipts setting

• Mismatched VAT setup between Turbo and your accounts package

Best Practices

• Decide VAT pricing strategy early (B2B vs B2C)

• Use product overrides instead of changing system defaults

• Train users on entering prices as inclusive/exclusive

• Verify VAT settings before accounts integration

• Regularly review VAT reports

Summary

Correct VAT setup requires alignment between:

• System default pricing

• Product-level pricing

• Invoice entry behaviour

• Cash receipt handling

• VAT reporting and accounting integration

When configured correctly, Turbo handles all VAT calculations automatically, even during live price negotiations.