Connect Invoices and Bills

Hi there, @Shahriar.

Allow me to share some details about Value Added Tax (VAT) in the United Kingdom and the process on how to link your Bills to your customer's Invoice.

VAT is a tax on business transactions that affects all purchases and sales, hence, it's not a tax on profits. You will either pay taxes charged on your bills or include them in your sales. If you pay out more in input tax (tax being charged on the bills you've paid) than you collect in output tax (vat added to your sales), you can fill in a form and reclaim the money from HMRC.

To link the Bill to the Invoice transaction, you'll have to turn on the Billable feature in the Account and Settings. I'd be happy to show you how to do that.

1. Go to Settings and select Account and Settings.
2. Select the Expenses tab and click the Edit or Pencil icon in the Bills and expenses section.
3. Turn on the Make expenses and items billable by clicking the radio button beside it.
4. Choose the applicable setup if you want to put a default markup rate or track it as income.
5. Select Save and Done. This is how it looks like:

Once done, you can create a Bill transaction and enter the Customer's name on the line item so that it will be tracked by the time you're going to create an Invoice.

I've added some screenshots for your reference:

To know more about the process, you can check out this article: Enter billable expenses.

You may also consider visiting the HMRC website regarding how VAT works: Businesses and charging VAT.

I'll be here if you have other questions. Feel free to tag my name in the comment section. Take care.