I have small interest income on my company bank deposits. My UK VAT report is showing them as sales leading to a small VAT liability. How do avoid this happening?

Financial services and operations, including charges and interest income earned from bank deposits or savings, are exempt from VAT, as stated in the VAT notice guidelines. It means they are not subject to VAT and should not be included in the VAT liability report, Paul.

The reason it appears in your report as a VAT liability could be due to incorrectly selecting the 'Include/Exclusive of tax' option or not changing it when recording the bank deposit. What you need to do is pull up those deposits and change the setup to No VAT to prevent this. Here's how:

1. Pull up the VAT liability report.
2. Adjust the report period to match the deposit dates.
3. Click the VAT liability hyperlink amount and click the Deposit hyperlink.
   
   
4. On the bank deposit page, change the "Amount are" dropdown to specify "No VAT."
   
   
5. Hit Save and close.

Refer to this article to learn more about other VAT notice guidelines: VAT rates on goods and services.

Please note that the bank deposit will be excluded from the VAT liability report as it does not include VAT. You can check the deposit in the Transaction by Account or No VAT transaction report.

Whenever you'd like to customise your reports in a group and be able to share them with other users, check this article for details: Save a customised report.

Please don't hesitate to ask if you have any further questions or need additional assistance with your transaction or VAT setup.