I have set up Taxes (VAT @14%), Tax Groups (1.Domestic, 2.Export) and Item Tax Types (1.E 2.S 3.Z) (Exempt, Standard Rate and Zero Rated respectively).

The first transaction I tried was for VATable legal fees.
I set up the supplier (our attorney) and then tried to capture a VAT invoice for monthly fees as a Direct Supplier Invoice.
After entering the invoice I checked the GL and found that the total payable to the attorneys was reflected as a credit in Accounts Payable, which is correct, but the debit side of the transaction was wrong.  Instead of posting the ex VAT portion to Legal Fees and the balance to the VAT control account, the whole amount, including the VAT component, was posted to Legal Fees.

Can anyone please advise what I might be doing wrong?

PS: In the supplier setup the "Prices Include VAT" box is ticked.