How tax works in Brixx

Summary

In Brixx you can set up one of three different types of tax - VAT, Sales Tax and GST. These all follow the same rules - in the examples below we will use VAT, but all of these rules apply to GST, and Sales Tax.

Tax eligible components have a switch to turn on their tax calculation. Tax payments to and from the tax authority are handled automatically and are timed to match the plan's financial year end.

 

Tax in Settings

There are two default tax rates which are set in Settings. By default these are 20% and 5% but you can edit these as you wish.

Tax in Components

Each component eligible for tax (Income, Operational Cost, Cost of Sales, Inventory, Asset) has a switch at the bottom of their component form to turn on tax. You can set tax to be automatically turned on in Settings (this will affect new components, but not existing ones). 

If you do not want to apply tax to a component, simply turn the tax toggle to the 'off' position in that component - tax will no longer be applied to that component.

The tax option in components allows you to select which of the two tax rates set in Settings to apply to the component. You can also select 'Custom' if you need to enter a tax rate different to either tax rate in Settings.

Tax 'On top of' or 'included in'

Tax can either be set up as 'on top of' the values entered in the component, or 'included in' them. 

For example, if you have an income component generating £100, then with tax 'on top of' this - you would see £100 income and £20 tax in your reports. 

If instead you use 'included in', you would see £83.33 income and £16.67 tax in your reports.

 

Payments to/from the tax authority

Brixx handles payments to the tax authority, so any payment or refund happens automatically. The timing of this payment is based on the plan's financial year end and frequency set in tax settings.

How tax is calculated in Brixx

If you look in the Cash Flow Report, there are 4 Lines for tax and a total Taxation line(which can also include Corporation Tax)

If a plan is connected to Xero, it will show tax included in lines like Cash Received, rather than split out.

Tax Paid on Goods and Services - this is the tax you pay when you buy an asset, or pay on top of a cost, a bill for example

Tax Received from Sales - this is tax you receive from your customers

Tax Paid to Government - this amount is paid to the government. It is equal to the tax received in that period, minus the tax paid in that period.

Tax Received from Government - If you paid more tax on costs than you received from sales, you will see an amount on the Tax Received from Government line to represent the tax claimed back from the government.

 

The Tax Paid on Goods and Services and Tax Received from Sales lines take into account when you receive or pay this tax(in cash), rather than when you invoice for tax.

In contrast, the two lines for tax that are paid or received from the Government calculate what must be paid/received based on when tax is invoiced. This payment can be delayed a number of months in Settings.

This means if a delay is set on a Cost component that has tax applied to it, Tax Paid on Goods and Services will display this tax when the cost + tax is paid, while Tax Received from Government will calculate the refund (if any) from when the cost appears on the P&L, rather than the delayed point at which the cash is paid on the Cash Flow.

You can see the current tax Liability on the balance sheet report.

 

Example
There is one Income component set up like so :

• £1000 pounds per month income.
• 1 Month delay from Invoicing to when the cash flows in.
• 20% VAT(That is £200 per month)

The Cash Flow Report shows:

Notice how the January column is empty on all of the rows, even the VAT ones, and in February and March on the VAT Received from Sales row you see £200 on each month.

Paying tax at the end of the quarter (end of March), you need to pay £600 - 3 months worth, not just the £400 you see in the Cash Flow report.

This is visible in the VAT Paid to Government row.

Even though cash didn’t come in until February, the taxable invoice went out in January, which means £200 worth of VAT for January.

You can view this in the Balance report sheet.

March is shown empty, because at the end of the month you will pay all of the accrued VAT through that Quarter.