I've just set up a new business and am very new to Sage and book keeping too so please bear with me here.
My business is not VAT registered. I buy products which I have to pay VAT on. I don't want to issue invoices to customers where they can see the VAT on so I sell things at normal rounded off prices like £9.99 etc. instead of £8.24 plus VAT (if you know what I mean!) I've entered my products onto Sage at cost price....in other words the cost price I have put on for my products is what I buy it at plus the VAT I am charged. My sales price is what I have researched and want to sell it at...hope thats right.
Right then, what VAT code do I use on the product record in the 'defaults' part? Do I use T1 cos the supplier charges me VAT or is this wrong cos I don't pay VAT?
Also, when I am doing a customer invoice, how do I get the VAT not to show up on the invoice I am sending out to the customer? Or does it need to show up on there??
AND does anyone know how I can apply a charge to invoices? Some of my products are bought over the net and I am charged a fee for using Paypal so I need to account for this in my invoice too.
Hope all this makes sense. Im on a steep learning curve here but want to get it right for when my books are due. I'd be mortified if the accountant tells me my books are soooo far out!!!
First and foremost, if you are not VAT registered you cannot charge or show VAT on your invoices.
As you are not VAT registered it really doesn't matter what tax code you use unless you are considering either registering or being forced to register due to turnover reaching £75,000.
As Sage defaults to T1 if you change T1 to zero percent tax then all will be fine and dandy. You can do this through Settings - configuration - tax codes.
As regards pricing all you need to show on your invoice is the unit price at which you are selling the item the quantity and the total price. If you want to charge postage and packing or courier separately to identify it from your usual sales you can add this as an additional item and post to a different code in 4000 range.
All is clear now and I shall proceed with my invoicing now. I was worried that because I was being charged VAT on the products I bought from suppliers I had to show it somewhere but if I just put everything under T1 but change it from 17.5 to 0 that should be fine right?
Just a quick question though, when I change the tax code to zero, it also affects the supplier invoices as they come up all VAT 0 too as though the products I have bought have no VAT on them. But on my paper invoices I recieve from them there is VAT on them so surely if Im putting say a purchase order on the system it needs to show the VAT as it does on the actual paper invoice I am copying from? Am I making sense??
The same goes for your purchases as it does with your sales. As you are not VAT registered you will not charge VAT to your customers and therefore not pay it to HMRC likewise you will receive invoices from your suppliers which will include VAT and must not be shown separately as you will not claim this back from HMRC.
So if you receive a purchase invoice for £100 + £17.50 VAT you will process it on the gross amount of £117.50 and don't account for the VAT.
When raising a purchase order on your system your purchase price for the goods will have to include VAT
you should ideally use T9 (Transactions not involving VAT)
If you are not VAT registered nor intending to be so (due to being under limit) it doesn't matter which T code you use in SAGE, however, as SAGE defaults to T1 it is easier to make T1 zero and use that for everything as you don't need to account for VAT.
Also T0 is for zero-rated items, T2 is for exempt items. Exempt and zero rated are not the same thing.
