DISCLAIMER
The team at Link My Books are happy to provide users with technical assistance in applying tax rules to their Link My Books setup. We are not Tax Advisors and so our advice and suggestions on the application of tax rules cannot be construed as tax advice. We highly recommend that users seek advice from qualified accountants for their tax compliance.
What is the issue with bundle products and VAT?
If you sell bundles that contain products with different VAT rates (for example, a gift set that includes a standard rated item at 20% and a zero rated item at 0%), Link My Books won't automatically split the bundle into its individual VAT components. This is because the bundle is sold as a single SKU with a single price on your sales channel.
The workaround is to calculate an effective VAT rate for the bundle based on the value of the products it contains, create that as a custom tax rate in Xero or QuickBooks, and then assign it to the bundle product in Link My Books using a dedicated product group.
Example: Calculating the Effective VAT Rate
Let's say you sell a bundle for £24.00 (inclusive of VAT) that contains:
Product A — Standard rated (20% VAT), value: £12.00 inc. VAT
Product B — Zero rated (0% VAT), value: £12.00 inc. VAT
The VAT on Product A is £12.00 ÷ 1.2 = £10.00 net, so VAT = £2.00.
The VAT on Product B is £0.00.
Total VAT on the bundle = £2.00
Total net value = £22.00
Effective VAT rate = £2.00 ÷ £22.00 = 9.09% (rounded)
💡 Tip: We strongly recommend involving your accountant in this calculation to ensure the effective rate is correct for your specific bundle and compliant with HMRC's rules.
Step 1 — Create a Custom Tax Rate in Xero or QuickBooks
Once you have calculated the effective VAT rate for your bundle, you need to create it as a new tax rate in your accounting software.
In Xero:
Go to Settings (the cog icon) → General Settings → Tax Rates
Click New Tax Rate
Give it a clear name (e.g. "Bundle Effective Rate 9.09%")
Enter the calculated rate (e.g. 9.09%)
Save the new tax rate
In QuickBooks:
Go to Taxes → VAT → Edit VAT → Edit Rates
Click Add Rate
Give it a clear name (e.g. "Bundle Effective Rate 9.09%")
Enter the calculated rate (e.g. 9.09%)
Save your changes
Step 2 — Refresh the Connection to Xero or QuickBooks in Link My Books
After creating the new tax rate in Xero or QuickBooks, you need to refresh the connection in Link My Books so that it picks up the new tax rate.
In Link My Books, go to Settings → Account Settings
Find your Bookkeeping Account (Xero or QuickBooks)
Click the Action dropdown next to it
Select Refresh Xero Cache (or Refresh QuickBooks Cache)
This ensures that the new custom tax rate you just created in Xero or QuickBooks will now appear as an option inside Link My Books.
Step 3 — Create a New Product Group for the Bundle
Next, you need to create a dedicated product group for your bundle product(s) so that you can assign the custom tax rate to them.
Click the Product Groups tab
Click Add New Group
Give it a descriptive name (e.g. "Bundle Products — 9.09% Effective Rate")
Click Save
Step 4 — Assign the Bundle SKU to the New Product Group
Now assign your bundle product SKU to the new product group you just created.
On the same Inventory → Product Groups page, click the Product SKUs tab
Find your bundle SKU in the list
Use the dropdown on the right to assign it to the new product group (e.g. "Bundle Products — 9.09% Effective Rate")
Step 5 — Set the Tax Rate on the New Product Group
Finally, assign your custom effective VAT rate to the new product group.
Go back to the Product Groups tab
Find the new product group you created
Click the Action dropdown and select Set Tax Rate
From the dropdown, select the custom tax rate you created earlier in Xero or QuickBooks (e.g. "Bundle Effective Rate 9.09%")
Save your changes
That's it! From this point onwards, any settlements containing your bundle SKU will use the effective VAT rate you configured, ensuring the correct amount of VAT is accounted for in Xero or QuickBooks.
⚠️ Important Notes
If the contents or pricing of your bundle changes, you will need to recalculate the effective VAT rate and update both the tax rate in Xero/QuickBooks and the product group in Link My Books accordingly.
If you have multiple bundles with different effective VAT rates, you will need to create a separate custom tax rate and product group for each one.
Only settlements that have not yet been sent to Xero or QuickBooks will be affected by these changes. If you have already sent a settlement and need to apply the new rate, you will need to Rollback, refresh and resend those settlements.
Summary
To handle bundles with mixed VAT rates in Link My Books:
Calculate the effective VAT rate based on the value of products in the bundle
Create the effective rate as a custom tax rate in Xero or QuickBooks
Refresh the Xero/QuickBooks connection in Link My Books via Settings → Account Settings
Create a new product group for the bundle on the Inventory → Product Groups page
Assign the bundle SKU to the new product group
Set the custom tax rate on the new product group
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If you have any questions about this article or feedback on how we could make it better please reach out to the support team via the blue chat icon on the bottom right of the page or via email to [email protected].