SAGE VAT Manual adjustments. - The Book-keepers Forum (UK)

Sirocco · Member

SAGE VAT Manual adjustments.

semsley · Guru

Oh

Why do you only include T1 in the return? How will this reflect total sales/purchases?

In cash accounting VAT is only included in the return on receipt/payment of the goods/services so I do not understand why you are manually adjusting things because at the end of each period what has been paid for will have been recorded.

To balance the purchase tax control, sales tax control and vat liability without using the wizard you prepare a journal - dr sales tax control, cr purchase tax control and (dr or cr the difference to vat liability depending on whether you have sold more than bought or vice versa) then the payment to/from HMRC is dr/cr bank dr/cr vat liability to balance.

Sirocco · Member

I only include T1 as I thought that T9 was totally outwith the realm of VAT?
I am making these adjustments on the basis that for smallish purchases such as fuel etc I sometimes only have evidence of a purchase by way of an entry on a Creditcard statement. The Actual VAT receipts follow on when the employee actually making the purchase sends it to me, which can be after the return date and sometimes not at all.
So at the time of the return being made I play safe and exclude purchases for which I have no VAT receipt to hand. I assume I am correct in thinking that I need to retain evidence of a Vatable purchase by having the actual receipt?
Thanks for the nom ledger info

semsley · Guru

What about T2 (for exempt supplies) and T0 for zero-rated and T (whatever you use for lower rate for gas/electric)? These items should appear in the VAT return even though no VAT is payable they should still be included in the total sales and purchases figures.

You are correct that you cannot claim without a VAT receipt although for purchases under £250 you will only need a less detailed VAT receipt which must contain the following::

The date of transaction
suppliers name and address
suppliers VAT registration number (9 digits)
description of purchase
value of the purchase inclusive of VAT.

If you don't have the VAT receipt before the return is due (which is 1 month after the end of the period plus an extra 7 days if you use online which is mandatory from next April) you can't claim for it in that period but can during the next period. How Sage accounts for this is when you press Calculate you will get a box which says there are x number of transaction x of which are for a previous period.

-- Edited by semsley on Tuesday 12th of January 2010 10:23:56 PM

-- Edited by semsley on Tuesday 12th of January 2010 10:25:07 PM

-- Edited by semsley on Tuesday 12th of January 2010 10:27:14 PM

Sirocco · Member

Thanks for the info.
For clarity are you saying that if the VAT receipt is not to hand it shouldn't be posted in Sage until it is available.? (and if no VAT receipt materialises it should be dealt with as a T9 entry?)

semsley · Guru

You would be better not posting it until you get the VAT receipt and if no receipt then posting it as T0, not T9. This is because it is still an expense and needs to appear on the VAT return as a purchase. T9 is for things which as you said originally do not involve VAT eg wages. Likewise purchases from someone who is not VAT registered should be input as T0 and things like car tax, insurance premiums, postage T2 because they are exempt items.

Sirocco · Member

Thanks for your help Semsley,
I think I ought to go back over my VAT acccount for the year and do a full reconciliation!

LaShel Bookkeeping · Veteran Member

Just a quick one on this, I always reconcile my sales tax & purchase tax control accounts to my vat records and ensure al T0, T1 etc codes are used in the full reconciliation. Have you got cash accouting set up on Sage as this should do everything for you?

Sirocco · Member

Yes I have got Sage set up as Cash Accounting and on checking all codes are included in the reconciliation .
I think my problems are occuring because 1) I am making manual adjustments to the tax box 4 only and not the purchases box as well?
2) I am only using T1 and T9 whereas I should be using T0 and T2 for certain expenditure.

Have you ever had to make manual adjustmnets using Sage, if so any shared experience would be appreciated!

Harps · Veteran Member

Hi there.

Another newbie here.

Just come across this website, it is fab and I am in awe of all of you with all that knowledge!!!

Regarding the VAT codes on SAGE, just to clarify, does this mean then that if I submit an invoice from a supplier who is not VAT registered it would go through as T0 and not T9? I don't think the training I received clarified this properly, they only ever used T1 and T9. I have discovered the zero rated codes and the exempt codes but thought as VAT was not involved at all it woud be T9.

Wella · Expert

Hi Harps welcome to the forum.

I contacted HMRC about the very same thing because that scenario cropped up in one of my questions when I took my L3 exam.

They stated that if a supply is made by someone who is not VAT registered then that supply falls "Outside the Scope of VAT" and the value does not appear on a return, therfore you use T9.

Bill

Harps · Veteran Member

Great, thanks fot that Bill. That's a relief!!!

Sirocco · Member

Earlier in this thread Semsley wrote

"Likewise purchases from someone who is not VAT registered should be input as T0 and things like car tax, insurance premiums, postage T2 because they are exempt items."

Is this T9/T0 issue written down somewhere?

semsley · Guru

As with everything at HMRC it depends on who you talk to.

VAT 700 is the bible and has everything you could ever wish to know within it.

Basically VAT has 3 rates - Standard, Reduced (for fuel) and Zero. It also acknowledges that some items are exempt from VAT has have no rate. On Sage it is usually T1 for standard, T5 for fuel, T0 for Zero T2 for exempt.

Other things such as bank receipts/payments, bank charges/interest,wages, paye, nic, journals, etc are outside the scope of VAT and Sage gives them the code T9.

So any supplies or expenses would be T0, T1, T2 or T5.

For goods or services supplied by a non-VAT registered company/individual it is the goods tax rating that applies not the fact that they are not VAT registered - so really they can be T0, T1, T2, depending on what they are. However, it is easier to use T0 because then you don't have to change the VAT and net value.

T9 items do not appear on the VAT return at all and so are not included in the figures for Sales or Purchases that is why goods and services, whether from a VAT registered company or not, need to be given a vatable code.

Wella · Expert

Hi Semsley

When I made my enquiry with HMRC, the person I spoke to didn't know the answer and had to seek guidance from his supervisor.

I didn't know about VAT700 and have just downloaded it from HMRC website.

I haven't read all the way through it properly yet but on page 12 section 3.3 they state

Supplies are outside the scope of the tax if they are:

Made by someone who is not a taxable person;
Made outside the UK and the Isle of Man (but see paragraph 4.8.3 for special place of supply rules for certain international services);or
Not made in the course or furtherance of business.

Bill

-- Edited by Wella on Tuesday 19th of January 2010 09:41:19 AM

Harps · Veteran Member

Hi everyone.

I was concerned that there were different views on the situation when processing an invoice from a none vat registered company. I have just rang the ICB regarding the above and they have agreed that all purchases even if they are from a none VAT registered company should be disclosed on the VAT return, therefore T0 should be used and not T9.
Thanks for everyones input on this.

Wella · Expert

Hi Harps

Looks like we posted at the same time. (See my previous post)

As I think Shaun said "if you want two different opinions, ask two different accountants"

Now I'm confused and will probably send myself mad reading VAT700 thoroughly

Bill

Wella · Expert

Another update

VAT 700 refers you to a VAT 700/12, which is the VAT return completion guide (online).

In section 5.8 titled "Things to remember when completing Boxes 6 & 7"

Leave out

VAT itself
wages and salaries
PAYE and National Insurance contributions
money put into and taken out of the business by you
loans, dividends, and gifts of money
insurance claims
Stock Exchange dealings (unless you are a financial institution)
MOT certificates
motor vehicle licence duty
Local Authority rates and
income which is outside the scope of VAT because it is not consideration for a supply.

The last line does say income but with what I was told by HMRC themselves, it appears that anything that is outside the scope of VAT is not included on the return.

I am prepared to eat humble pie and the more I read VAT700 and the other notices the more confusing its getting (who said tax shouldn't be taxing?)
Bill

-- Edited by Wella on Tuesday 19th of January 2010 10:26:20 AM

Wella · Expert

Semsley can you pass the cream please

Humble pie is a bit bland and hard to swallow.

I have just spoken to HMRC, this time I have been told that goods/supplies received from a non VAT registered person do get entered on the return!!.

Fortunately for me I have not had a real world instance of this situation yet

Bill

-- Edited by Wella on Tuesday 19th of January 2010 12:35:21 PM

-- Edited by Wella on Tuesday 19th of January 2010 12:36:26 PM

semsley · Guru

Hey Bill don't worry - VAT is an absolute minefield and HMRC operatives don't make it any easier.

However, if you think about it logically there is some logic there.

Sirocco · Member

Humble pie doesn't taste that bad I've had to eat it several times along with a few hats!
I'm so glad that I started this thread!

The subject seems to be exhausted but can anyone answer my one outstanding query on making manual adjustments to the VAT return.

As an example,
I have posted up an expense receipt in Sage using T1 without having the actual receipt to hand and need to complete the VAT return.
I expect this receipt to arrive about a week after the VAT return is due to be submitted.
I want to make a manual adjustment to the VAT return which I will reverse in the next VAT return if that receipt does actually arrive.

Lets say for argument that the purchase value is Net £100.00 VAT £17.5 Gross £117.500

When I run Sage to calculate the VAT due it will have included the £17.50 in Box 4 and presumably the £100.00 in box 7.

Qu. Should I merely reduce the value in Box 4 by £17.50 (and then add it back into the next return) or do I need to adjust Box 7 and reduce it by £100.00 as well.

This issue will be academic soon as I will take Semsley's advice and only post up in Sage when the receipts are to hand, but in the meanwhile some guidance will be appreciated.

I promise this will be the last time I ask this qu.! and thank everyone for their contribution.
smile

Wella · Expert

Don't ask me, can't talk with my mouth full
Bill

semsley · Guru

Stand to be corrected but I would reduce both as if the transaction had not taken place. Then add them both to the next return if a VAT receipt is forthcoming. If not just add the entire total to box 7.

btw it's Sheila but I couldn't us that as there already was one.

-- Edited by semsley on Tuesday 19th of January 2010 05:38:04 PM

Sirocco · Member

Thanks Sheila,
I think I can see thh logic in the two alternatives.
In my example, reduce box 4 by 17.5 and box 7 by 100 to treat it as a T9 or reduce box 4 by 17.5 and add 117.5 to box 7 to treat it as a T0
Thanks again
Graham