Sage VAT codes when theres no VAT - The Book-keepers Forum (UK)

sarahwilson · Veteran Member

Sage VAT codes when theres no VAT

Mary · Veteran Member

You should use a T1 tax code and nil out the VAT as cleaning is a standard rated service, it's just that the supplier in question is not VAT registered.

Count1314 · Senior Member

Mary - I am not sure if it makes much difference, but I would be inclined to use T0 (Zero rated) as there is zero VAT. The numbers will appear on the VAT return the same but the detailed report will show these figures in different areas.
However, it has made me think....should it depend on the type of service provided or the status of the supplier??? I suppose it can be argued that the service is not at 0% because the supplier is not VAT registered - there is simply no VAT.
Has my mind been working the wrong way for all these years?! smile

Julie · Senior Member

If a supplier is not vat registered I have always used T0, if this is wrong Ive not had my hand slapped by the accountants ! so I assume its OK.

TraceyAnn · Veteran Member

Oops - I've always used T2

Silly Digits · Senior Member

Just to confuse even more, I use T9 if the supplier is not VAT registered and no VAT is charged.

rosie147 · Newbie

I also use T9 as there is no VAT involved

Wella · Expert

If a non registered business supplies goods or services, it falls outside the scope of VAT and therefore code T9 should be used to prevent the value appearing on the VAT return. T0 and other codes still add the value to the return but strictly speaking it is not accounted for HMRC VAT purposes.

I only know this because a similar scenario appeared in an exam assisgnment, so I contacted HMRC to confirm.

Hope this helps

Bill

BackOfficeGroup · Guru

T9, as per an ICB paper, is for non registered VAT businesses.

T2 is for an expense that is not subject to VAT ie bank charges

T1 is for normal rate

T0 is for zero rate

I normally would use T0 for zero rated or non VAT invices but since I found out, its changed my mind.....how confusing!

So for the VAT return purposes, are we saying that only expenses that have VAT should be shown on the VAT return? I've always believed that you should only deduct things like payroll, drawings and the like from the box 7 total - I've always included all business expenses, VATable or not......that's in manual so I've done the same on Sage. Now I'm not so sure.......

P

Wella · Expert

Hi BackOfficeGroup

On the VAT return you do include all sales made, whether they attract VAT or not (Can't think of anything that might be supplied that isn't either vatable, reduced, zero or exempt)

On the purchases, only goods or services that fall within the scope of VAT, which is anything that has been supplied by a VAT registered business and has a VAT rate (inc 0%) or is exempt should be entered. If the supply was made by a non registered business, it falls outside the scope of VAT and isn't included on the return it's the same as if you didn't get, or lost a VAT invoice from your supplier, you don't enter it because you can't claim it.

Basically if something "falls outside the scope" of VAT (that's how HMRC describe it) they don't want to know about it. Obviously, the other arm of HMRC, will still be interested in the invoice, regardless of its VAT status, when it comes to income/ corporation tax

Hope this is a bit clearer

Bill

Weebly_one · Veteran Member

I used to use T9, but when I querried this with the HMRC they said the net amount of the supply should still be in the VAT report even if the supplier is not VAT registered, so I changed to T2 (exempt). They actually said to me use T0 or T2 - they are not bothered - so use whatever makes sense to me!

I think in some respects there is no right or wrong answer - it depends on who at the VAT office you talk to.

kjmcculloch · Guru

I would generally use T9 too.

Wella · Expert

The debate goes on!

I would agree with Weebly one, it will depend on who you speak to at HMRC. When I phoned them, the person I spoke to had to go off and check with his supervisor.

You'd think that this question would have been raised before, as it must occur a lot.

I personally will stick with T9 as the supply is neither 0 rated nor an exempt supply.
According the website, under the "when not to charge VAT" bit, it definitely says that if you are not registered or are supplied by non registered, the transaction is not accounted for and is not included on the return.
http://www.hmrc.gov.uk/vat/forms-rates/rates/rates.htm

I am a bit worried though, because it says the same for exempt supply goods too but my Sage software defaults to include T2 on the return!

Could someone else read the section as see what they think. Just in case!!

Bill

kjmcculloch · Guru

Hi Bill,

I had a read and I still think it's T9.

It's not zero rated, because these are specific goods on which VAT is not charged. So it can't be T2