Taxes and Customer Invoices

Odoo Accounting applies taxes automatically on customer invoices, keeping the calculations and reporting consistent for UK VAT and other tax regimes.

How taxes work on invoices

Taxes are added on individual invoice lines, either automatically because they are configured on the product, or added manually. Odoo computes the tax amount from the line subtotal and the tax’s configuration, and creates a tax payable journal item to track the tax debit or credit. Totals from invoices and vendor bills over a period are aggregated in the Tax Return report.

UK VAT and Making Tax Digital

UK-registered companies typically install the UK – Accounting module, which includes a VAT100-ready tax structure, and the UK – Accounting Reports module, which allows tax reports to be sent to HMRC through the Making Tax Digital (MTD) VAT API. All VAT-registered businesses in the UK must submit VAT returns using MTD-compatible software. To connect, go to Accounting > Reporting > Tax report and click Connect to HMRC, then import obligations and click Send to HMRC for each period.

Creating a customer invoice

1. Create a draft invoice from a confirmed sales order, or manually from the Customer Invoices journal on the Accounting dashboard.
2. Select the Customer, so their invoice address, payment terms and receivable account populate automatically.
3. Set the Invoice Date and Due Date or payment terms.
4. In Invoice Lines, click Add a line to add each product, quantity, price and any applicable tax.

Tips

• Check the default tax on a product before invoicing, so it is applied correctly without manual editing.
• Register with HMRC before the first MTD submission, since this only needs to be done once per company.

Frequently asked questions

Does Odoo calculate tax automatically on invoices?

Yes, once a tax is applied to an invoice line, Odoo computes the tax amount and creates the matching journal items.

Do UK businesses need to submit VAT returns through software?

Yes, VAT-registered UK businesses must follow Making Tax Digital rules and submit VAT returns using compatible software such as Odoo’s UK Accounting Reports module.

Where do I create a customer invoice?

From a confirmed sales order, or manually from the Customer Invoices journal on the Accounting dashboard.

Need help?

Need help configuring VAT and invoicing in Odoo Accounting? Contact support@thoughtlogik.com or see our Odoo implementation services.