Welcome to the Community. Let me share a few insights about how to handle the previous overpayment given by your sales tax agency so you can allocate the amount to pay for your VAT bill to match the reporting as well.

Let's Use the Credit Note and enter a negative sales tax adjustment to move money out of your Sales Tax Liability account. Here's how:

1. Go to the Customers menu.
2. Select Create Credit Notes/Refunds.
3. Choose a customer name. This is required and if you don't want to use a real customer, you can click Add New to enter a customer name. You can enter "Accountant Use Only".
4. Click the first empty line in the Item column. Then:

• Choose the sales tax item you want to adjust.
• Enter the amount of the adjustment in the Amount column.
• Click Tab or Enter.

When a message "Changing the amount of a tax line item may cause your sales tax reports to be incorrect." prompts, click OK.

     5. Repeat Step 4 for any other sales items to be adjusted. Then, click the next empty line, and:

• Select a Discount item.
• Enter the total amount equal to the adjustment(s) entered in the first line in the Amount column.
• Click Tax in the Tax column.

      6. Ensure that the total amount is $0.00. Then, click Save & Close.

As an additional reference, you can also read through this help article: Process sales tax adjustment. It also contains steps about how to enter positive adjustment if you need to increase your sales tax in the future.

Please let us know if you have any questions. I'll be glad to get back and answer. Take care!