Understanding and Using Tax Schemes in Recycly ERP

What are Tax Schemes?

Tax Schemes in Recycly are rules that control how both taxes and account codes are applied to financial transactions such as sales, purchases, and invoices.

They allow you to:

• Adapt the way VAT/GST (or other local taxes) are calculated depending on who you are dealing with and what you are selling or buying.
• Redirect financial postings from one account code to another in your Chart of Accounts, depending on the nature of the transaction.

For IT Asset Disposition (ITAD) businesses, Tax Schemes ensure compliance with different tax obligations when:

• Selling assets to businesses in different regions
• Handling exports outside your country
• Dealing with suppliers who may be exempt from certain taxes
• Posting sales or purchases to the correct revenue or expense accounts automatically

Without Tax Schemes, every transaction would use the same default tax settings and account codes, which would quickly cause errors and non-compliance.

How Tax Schemes Relate to Other Areas in Recycly

1. Asset Types & Services and Internal Categories

• Default Taxes can be set on each Asset Type or Service (e.g. a refurbished laptop or a secure data wiping service).
• Internal Categories (e.g. “Laptops”, “Servers”, “Recycling Services”) can also have default tax and accounts set, which will apply to Asset Types and Services in those categories, if they do not define those account codes themselves.
• A Tax Scheme can automatically map or replace these default account codes when it is selected on a Customer, Sales/Purchase Order or Invoice.

Example:

You normally sell refurbished laptops with 20% VAT, posting into account 4000 – Domestic Sales. When selling to an EU business customer, the Tax Scheme can remove VAT and post the revenue into 4010 – Export Sales.

2. Address Book Records (Customers and Suppliers)

Each customer or supplier record in your Address Book can be linked to a specific Tax Scheme.

• For customers, this ensures that invoices raised for them apply the right taxes and account codes automatically.
• For suppliers, incoming supplier bills can also be adapted if they fall under special rules (e.g. reverse charge, or different expense accounts).

Example:

A UK customer uses standard VAT and domestic sales accounts, but an EU business customer may use the "EU Reverse Charge" Tax Scheme, which removes VAT and posts the revenue to an export account.

3. Invoices

When creating an invoice (customer or supplier), Recycly automatically checks:

1. The Address Book record (linked Tax Scheme)
2. The Asset Type or Service and its Internal Category
3. The Tax Scheme rules

It then applies the correct tax treatment and account mapping without manual intervention. Users can still review and override if required.

4. Other Relevant Areas

• Quotations and Sales Orders: Tax Schemes are applied at the quotation stage, so customers see the correct taxes upfront, and accounts will later post correctly.
• Purchase Orders: Ensures supplier invoices line up with your expected tax and account posting rules.
• Reporting: Tax Schemes ensure that both tax amounts and account codes are correct, so VAT returns, profit and loss, and balance sheet reports remain accurate.

How to Configure a Tax Scheme

1. Navigate to Tax Schemes
   Go to Invoicing → Configuration → Tax Schemes.
   
2. Create or Edit a Scheme
   Define:
   • Name (e.g. “EU Reverse Charge”)
   • Country or region rules
   • Mapping rules for taxes and accounts
      
3. Set Mapping Rules
   • Tax Mapping: Replace default taxes with the correct alternative.
   • Account Mapping: Redirect postings from one account code to another.
   • Example: Replace “VAT 20%” with “No VAT – EU Export”, and map 4000 – Domestic Sales to 4010 – Export Sales.
     
4. Assign to Address Book Records
   • Open a customer or supplier record
   • Choose the relevant Tax Scheme from the drop-down
     

From now on, any transactions linked to that Address Book record will follow both the tax and account mapping rules you defined.

Assigning a Tax Scheme to Customers and Suppliers

Once you have created one or more Tax Schemes, the final step is to link them to the correct customers and suppliers in your Address Book.

1. Go to Address Book → Customers (or Suppliers).
2. Open the record for the relevant contact.
3. In the Accounting tab, locate the Tax Scheme field.
4. Select the appropriate Tax Scheme from the list.
5. Save the record.

From this point onwards:

• All new quotations, sales orders, and invoices for that customer will automatically follow the Tax Scheme rules.
• All purchase orders and supplier bills for that supplier will also apply the correct tax and account mapping.

This ensures that your business processes remain compliant and that you minimise manual adjustments during invoicing and reporting.

Key Takeaways

• Tax Schemes automate compliance by replacing default taxes and re-routing account codes.
• They interact with Asset Types & Services, Internal Categories, and Address Book records to ensure accuracy.
• Assigning Tax Schemes directly to customers and suppliers ensures transactions post correctly every time.
• Correct setup means invoices, quotations, and reports always reflect the right tax and posting treatment.

By configuring and assigning Tax Schemes carefully, ITAD businesses can handle complex tax and accounting scenarios confidently and reduce the risk of manual errors.