Why are there 3 nominal codes for VAT?

Question

Hi all 
 My system shows the following 3 nominal codes for VAT: 
 2200 Sales Tax Control Account 
 2201 Purchase Tax Control Account 
 2202 VAT Liability 
 Surely, VAT liabiity = Sales Tax - Purchase Tax, so why have a seperate code for VAT Liability? 
 Secondly, code 2202 shows a sum which is not equal to Sales Tax - Purchase Tax. So where has this number come from? 
 Any help greatly appreciated!

Anth Richardson · Accepted Answer

Hi AOE , 
 Thanks for using Sage City 
 The reason for the 2202 VAT Liability ledger being around is due to the calculations that take place when you run your VAT Return. 
 Prior to running the return itself, the VAT element of your transactions build up in the Sales and Purchase Tax Control Accounts as required. Then when you run the return and post the VAT Transfer, these values are totalled up and the net is transferred to the VAT Liability account. 
 Think of the Tax Control Accounts as Sage putting the VAT to one side, and the VAT Liability account as the final "this is the VAT you owe" account once the two accounts have been reconciled. 
 The reason for the variance between the ledger balances is that these ledgers shouldn't in fact balance in the way you're suggesting - They would only balance in the event in that you've just run your VAT Return, have transferred over the values, and not processed any transactions with VAT on them after the date of the VAT Return. Even in that scenario, the ledger balances of the two control accounts would then be 0.00. 
 The balance on the VAT Liability account should tally with the VAT due on your previous VAT Return. 
 I hope this is helpful. Have a great day 
 Regards. 
 Anth 
 Sage UKI.

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Why are there 3 nominal codes for VAT?

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