VAT Control Accounts Explained: Codes 2200, 2201 & 2202
If you've ever looked at a Sage chart of accounts and wondered why VAT seems to be recorded in three different places, you're not alone. It trips up a lot of people learning bookkeeping, because VAT doesn't behave like a normal expense or income line — it's money the business collects and pays on HMRC's behalf, not its own.
The three codes, and what each one holds
Code 2200 — Sales Tax Control Account holds the VAT the business has charged on its sales. Every time you invoice a VAT-registered sale, the VAT portion lands here as a credit. It's money you've collected on HMRC's behalf, not your own income.
Code 2201 — Purchase Tax Control Account holds the VAT the business has paid on its purchases. This is usually reclaimable, so it works the other way — increasing with a debit each time you record VAT on a supplier invoice.
Code 2202 — VAT Liability is effectively the net of the two: what's charged on sales, less what's reclaimable on purchases. That net figure is what actually gets paid to (or reclaimed from) HMRC.
A worked example
Say over a quarter, a business invoices £24,000 of VAT-registered sales at standard rate, and has £9,600 of VAT on its own purchases and expenses.
Output VAT (code 2200): £24,000 × 20% = £4,800 credited to the Sales Tax Control Account.
Input VAT (code 2201): £9,600 credited by suppliers means £9,600 debited to the Purchase Tax Control Account.
Net position (code 2202): £4,800 owed, less £9,600 reclaimable — this business is actually due a £4,800 refund from HMRC for the quarter, since it paid out more VAT than it collected.
This is exactly the kind of figure our VAT calculator is built to check quickly — plug in an amount and the rate, and see the VAT portion on either side of a transaction before it ever reaches the ledger.
Why this matters day to day
Getting comfortable with this split matters because these are liability accounts, not expense or income accounts — VAT charged on a sale never appears in your actual sales income, and VAT paid on a purchase never appears in your actual cost of that purchase. Mixing the two up is one of the more common bookkeeping errors for anyone new to VAT-registered trading.