VAT & Currency Assumptions

VAT and Corporate Income Tax rates as well as currency assumptions are managed from the Taxation group on the ribbon.

6.1.1 VAT Assumptions

On the VAT Assumptions page user must first configure the VAT rates that could apply to different kinds of transactions throughout the model.

In the VAT Config table yellow cells are used to list all different VAT rates. User can list up to 5 different rates, one of them being Zero VAT Rate. In our example above, VAT Rate 1 is 20%, VAT Rate 2 – 10%, etc.

As you can see, after defining each VAT rate once, it automatically applies to all forecast periods at the top of the section.

After configuring the VAT rates, we can apply them one by one to each income, expense, overhead and fixed asset type separately using the drop down lists in yellow cells. E.g. let’s say VAT Rate 1 applies to Sales A. VAT Rate 1 is 20%, as configured earlier. That means, for each £120 of Sales A, £20 will be accrued as output VAT.

In order to review how different VAT rates effect the overall projections, please, review Section 3: Inputs: Income & Expenses & Section 4: Inputs: Assets.

6.1.2 VAT Payment Configuration

Users can easily configure VAT payments schedule from the VAT Assumptions section.

It is possible to assign fixed monthly payments for the VAT account. Model also allows the user to modify monthly payments for each period separately by unprotecting the model and manually entering the information in row ‘VAT Payments on Account (unprotect sheet to over-ride)’. For detailed instructions on how to unprotect the model, please review Section 8.6: Unprotect Model.

In the VAT Payments Configuration table we can apply general settlement and payment terms:

• Frequency of Account Settlements – the frequency at which our obligation of settling VAT accounts arises. User can select 1 for monthly settlement, 3 for quarterly settlement and 12 for annual settlement.
• First Payment Month of Calendar Year – In our example above, we have selected 1 for January, meaning that first VAT payment took place in that period. Therefore, the next payment will take place three months later, in April.
• Settlement Payment Lag (months) – The number of months it takes to pay the VAT after settling the accounts.
• Settlement Payment Lag (months) – The number of months it takes to receive the VAT refund after settling the accounts (in case the VAT account balance is negative).

We can see the effect of our configuration in Taxation >> VAT Calculations Section:

VAT accounts are settled once every three months. Payment is made one month after the settlement.

6.1.3 Currency Assumptions

Model allows the user to easily manage foreign currency exchange rates from the VAT Assumptions Section:

All foreign currency values must be expressed in terms of GBP. As shown in our example above, we enter the forecasted value of 1 GBP in EUR (1.1) and USD (1.3) in yellow cells in Currency Configuration table. These rates are automatically applied to all periods of our forecast. If we want to apply different rates to individual periods, we must first unprotect the model (as explained in Section 8.6: Unprotect Model) and then, manually enter exchange rates under corresponding months.

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