Zero-rated VAT set up

[isc]

We are a Charity who are looking into how to set up VAT in Square. We stock items that are VATable at the standard UK rate but we also have many items that are eligible for zero-rating. 

We are trying to work out the best way to set this up as many of the items are only zero-rated if sold to an eligible person, if the person is not eligible then the standard rate would need to be applied.

What would the best way of setting this up be? Do we need to set up two rates of VAT and then apply as required? My concern would be how the team would know what items VAT MUST be charged on and what items are eligible for zero-rated if sold to an eligible person. Can we specify this for each item?

Any support, tips or experience with this would be greatly appreciated.

Thanks in advance!

[Summer2024 · Accepted solution]

Hi, @isc ! Welcome to the Square Community! 

Some of my favorite people that use Square are charities! Happy to provide some insight here.

To handle items that can either be standard-rated or zero-rated based on the buyer's eligibility, I recommend the following setup:

Create Two VAT Rates in Square

You’ll want to create two separate tax rates:

• Standard VAT (e.g., 20%)

• Zero-rated VAT (0%)

You can do this via your Square Dashboard under Settings > Sales Taxes.

Assign Default Tax per Item

Square allows you to assign a default tax rate per item. For items that are always standard-rated, assign the standard VAT rate. For items that may be zero-rated based on customer eligibility, assign no default tax rate. This gives your staff flexibility.

Train Staff to Apply Tax at Checkout

Since eligibility varies by customer, your staff will need to manually select the appropriate tax rate (zero-rated or standard) during the checkout process. This ensures compliance and gives you the ability to handle both scenarios appropriately.

To help your team:

• Use item descriptions or modifiers to note VAT conditions.

• Provide clear training or signage so they understand which items may require discretion.

Track VAT in Reporting

Square’s tax reporting tools can help you see how much was collected under each rate, which will be useful for your VAT returns and auditing purposes.

Let me know if you have any other questions! I hope this helps!