The VAT from all your sales invoices goes into the sales tax account, and the balance on the account is therefore the VAT you owe HMRC on your sales.
There should be another account - the purchases tax account. In a similar way, the VAT on any supplier invoices etc that you post goes in here, and it therefore represents the VAT HMRC owes you on your expenditure.
Each quarter, when you produce a VAT return, you should journal (or the software might offer to do it for you) the the amount of outputs VAT on the return from the sales tax account (debit) to the VAT control account (credit) and the amount of inputs VAT on the return from the purchase tax account (credit) to the VAT control account (debit). The net of the two - and therefore the balance on the control account (in an ideal world) should be the amount due to or from HMRC. When the due amount is paid (or received), it goes into this account to zero it.
There should remain a balance on both the sales and purchase tax accounts which is the VAT on any sales and purchases invoices posted after the end of the VAT quarter. (It's a little bit more complicated than that if you're on a cash basis, or a flat rate scheme I guess, but I've never been involved with anyone on a flat rate scheme.)
__________________
Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
The idea of the sales tax account is to ascertainwhat sales invoices have not been accounted for in a VAT Return.
When Sage prepares your VAT Return, it will flag up all the transactions used in the Return and transfer the amounts on the sales and purchases tax control account to the VAT Control Account. By doing this, it will make it easier to reconcile VAT.
