Set Up Tax Rates, Payment Terms and Nominal Codes

Paperwork does not fill in a single tax rate for you. Until you add them, invoices carry no VAT and no due date, and nothing warns you. This page builds the four finance lists, in the order they depend on each other: Tax rates, Payment terms, Account types and Nominal codes.

Before you start

• You are an organisation Owner. References is open to organisation Owners only. Anyone else sees "Only organisation Owners can manage reference data." See Set up your organisation and team.
• Step 4 is done, in particular your decision on Lock accounting codes in invoicing. See Choose your core settings.
• Your VAT registration details and your accountant's nominal codes, if you have them. Copy the codes from your accounting package exactly. It makes connecting Xero much easier later.

Click References under Admin in the Paperwork sidebar. The index lists every list with its counts of Active and Archived entries. Click a row to open it. To add an entry, click the add button at the top of the list — it is named after the list, for example Add tax rate — fill in the form and click Add.

Add a tax rate

Nominal codes pick a default tax rate from this list, so add your tax rates before anything else on this page.

Open Tax rates and click Add tax rate

In References, open Tax rates and click Add tax rate.

Enter a Code, Name and Rate

Enter a short Code, a Name and the Rate as a percentage, between 0 and 100. Click Add. A code that already exists is refused with "A tax rate with this code already exists".

Here is a suggested starter set.

Code	Name	Rate
STD	Standard rate	20
RED	Reduced rate	5
ZERO	Zero rate	0

Add Exempt (EXEMPT, 0) and Outside scope (OOS, 0) as well if you use them. They are both 0%, but your accounts may treat them differently.

Add a payment term

A payment term gives an invoice its due date. A customer with no payment term gets invoices with no due date at all.

Open Payment terms and click Add payment term

In References, open Payment terms and click Add payment term.

Enter a Finance code and choose a type

Enter a Finance code, for example NET30. Choose a Payment term type:

• day(s) after bill date — due a number of days after the invoice date
• of the current month — due on a set day of the invoice's month
• of the next month — due on a set day of the following month
• of the month after next — due on a set day two months on
• end of month — due at the end of a month

Enter the quantity and click Add

The quantity box changes with the type you chose. For day(s) after bill date it is Number of days. For end of month it is Number of months ahead, where 0 is the end of this month and 1 the end of next month. For the three day-of-month types it is Day of the month (1–31).

A suggested starter set:

Finance code	Type	Quantity
NET30	day(s) after bill date	30
EOM	end of month	0

Add NET14 or NET60 if you give customers those terms. You choose the term on each customer, on step 9.

Add an account type

An account type groups your nominal codes into either Revenue or Expenses. A nominal code cannot be saved without one.

Open Account types and click Add account type

In References, open Account types and click Add account type.

Enter a Name and choose a Class

Enter a Name and choose a Class of Revenue or Expenses. Click Add.

Suggested starters are Sales (Revenue) and Cost of sales (Expenses).

Add a nominal code

A nominal code is the ledger code a piece of income or cost is posted to. It can also carry a default tax rate, which is the last place Paperwork looks for VAT.

Open Nominal codes and click Add nominal code

In References, open Nominal codes and click Add nominal code. If you have not added an account type, you cannot pick one and the code cannot be saved.

Fill in the code and pick its account type

Enter the Code, which must be 2 to 7 characters ("Code must be 2–7 characters" otherwise), a Name and, if you like, a Description. Choose the Account type.

Choose a Default tax rate and click Add

Pick a Default tax rate (optional). Set one on every code you invoice or buy against, unless every customer and site has its own rate. Click Add.

A suggested starter set, which you should replace with your accountant's codes:

Code	Name	Account type	Default tax rate
4000	UK sales	Sales	STD
5000	Cost of sales	Cost of sales	STD

Add one code for each separate stream your accountant wants to see, for example skip hire, haulage and recycling income. The nominal code you attach to a container type is what a line is invoiced under, and it is what supplies the VAT when nothing else does. Purchase orders work the same way on the cost side: tax on each line comes from the cost's expenditure nominal code, so that code needs a default tax rate too.

Know how VAT is decided on an invoice

For each line, Paperwork looks for a tax rate in this order and uses the first it finds:

1. The tax rate on the job's customer site.
2. The tax rate on the customer.
3. The default tax rate of the line's nominal code. For a waste line that is the container type's revenue nominal code, and for an extra it is the extra type's nominal code.
4. None. The line gets no VAT at all, and nothing tells you.

So the tax rates you create here are used in three places: the nominal codes on this page, and the customers and sites you create on step 9. A customer who is zero-rated or reverse-charge should have that rate on the customer or site, so it wins over the container type's default. See Finance for the full invoice picture, including Tax rate override.

If you skip this

• No tax rates — a job line is invoiced with no VAT unless its site or customer has a rate, and neither can have one until the tax rate exists. Invoices look complete but carry no VAT.
• No payment terms — customers cannot be given a term, and their invoices have no due date.
• No account types — you cannot save a nominal code.
• No nominal codes — nothing supplies a default tax rate, containers and extras carry no ledger code, and you cannot connect Xero until they exist and are mapped.
• Codes copied inexactly from your accounting package — mapping them to Xero later becomes manual clean-up.

Check it worked

• On the References index, the Active counts for Tax rates, Payment terms, Account types and Nominal codes are all above zero.
• Open Nominal codes. Every row shows an Account type and, where you set one, a Default tax rate such as STD.
• The VAT check that really matters happens on step 9, when you give a customer a tax rate and a payment term, and on step 11, when you read your first invoice.

What to do next

Step 6, Set up your operations lists, builds containers, unit types and the other lists that jobs are built from. Container types can use the nominal codes you have just created.

• Reference Data — every list, and what stops working when one is empty
• Finance — how invoices are raised, and how VAT and due dates are worked out
• Finance settings
• Connect Xero — when you are ready, after step 11