I have just started doing the bookkeeping for a company who buys there goods from China and the company I work for sells its goods to customers all over the world, I havent done this type of accounts before and want someone to tell me if I am accounting for vat correctly. Firstly on the companys sales am I right in thinking that no vat is charged on the sales invoices and these sales are posted as T0?
Secondly on the supplies purchased from china there is no vat charged so none can be reclaimed? Also when the goods reach the port here they have to pay the shipment company and this is where i am confused as some of the invoices state for example £10.00 administration charge and for example £6.00 vat. Therefore if i post it on sage as it is shown on the invoice this wont show correct on the vat return as the £10.00 is shown on the invoice as T0 and the vat element of £6.00 wont have any amount to allocate the vat to? Hope this makes sense as I am really confused as to how i should be posting this. Also I though that within the EU sales and purchases had to be posted as T8 and T7?
Please excuse if this comes up twice; I just made an earlier reply disappear somehow.
I'm ready to be corrected by someone with more direct experience of dealing with overseas transactions, but this is my understanding:
Exporting goods to a customer outside the EU is normally zero-rated, which would be T0.
Clearly, if no VAT has been levied on a supply you have bought, there is no vat to reclaim. You can't claim back something you haven't paid in the first place.
You would expect a £10 admin fee to have £2 vat added. There must be another explanation. In cases of doubt like this, ring up the company that's raised the invoice and ask them.
For customers outside the UK but within the EU area (which, for vat, includes a few extras, check the HMRC website) you normally use T4 if they are vat-registered.
For suppliers (only) outside the UK but within the EU area, you'd normally use T7 for zero-rated purchases and T8 for standard-rated purchases.
I hope your company provides the necessary training for you to take on these tasks - it's important that they should because it's their (i.e the Directors) responsibility that the accounts are done correctly.
You may be paying VAT on an import (based on the import value), plus the admin fee for processing the VAT import charge paid by the shipping company to HMRC. This is one of the many reasons I always disliked sage! With VAT of say £15k+ and sometimes, that all on the invoice - I used to spend large amounts of time correcting and adjusting substial VAT errors on Sage when others would try to post the invoice (incorrectly) and often would compound the error by trying to correct it.
From memory the only way of doing it - is to post the VAT amount to the VAT nominal code and not use the T codes. i.e. use the VAT nominal code in the same way you would use an expense nominal code.
thank you for your replies but I am still a little confused. The way the company has been doing it is as follows
sales outside of uk and outside EU posted as T0 sales outside of uk buT in the EU posted as T2 (I thought this should be T8?)
purchases from overseas outside of the EU they dont charge vat but there is vat duty to pay once it reaches the port here before it can be released. Therefore the carrier in the uk issues an invoice for example as below and I have shown how they have been posting it Duty fee £10.00 T0 Administration fee £50.00 TO VAT Duty £15,000 nothing in net figure and the £15,000 in the vat box and T1 tax code. (This is the bit where I am confused aswell as with no figure in the net figure surely this will put the vat return out and it will shown that more vat is being reclaimed than should be?
I have looked at HMRC website but find it too complex to understand!!!
Can you tell me firstly if the posting of the sales is correct and secondly if the posting of the imported goods is correct or not.
The imported goods looks fine, I use a different system to you so am not totally sure on codes, but we do deal with imports. We put the charges etc as zero rated and the vat you want to reclaim in the vat box, and it all works out fine. (So it could look like £15 net, £1750 vat, £1765 gross) HMRC will send out a VAT certificate to confirm the amount of VAT so there is no reason to question the VAT returns and if they do you have the evidence on file. You are not supposed to claim the VAT back until you receive the certificate.
Re the sales I can't help as don't know Sage codes off by heart I'm afraid.
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
When we import goods from America, we pay VAT to the shipping agent who handles the importattion. We enter this with a zero in the net figure, with a code of T6 (which may be one of our own making, specifically for VATable purchases from outside the EU), and the amount of VAT paid in the VAT column. Then, when we get the invoice from the suppier for the goods, we enter this also with a code T6, but with zero VAT., The two entries will then both go on the VAT return correctly, showing the net value of the goods and the VAT paid thereon.
I have a client like this and this is how I was told to do it by the accountant and have been doing it this way for a few years now.
SAGE - Import duty and VAT this is when it is shipped to the UK say from china. First you may have an amount say £15 to duty post this as normal to to 5101 and I think its T0 (from memory), then the VAT part this is the important part so its included in the VAT return. Post the VAT as a T1 (20%) but don't put this in the net column, tab across and put it in the VAT column this will then automaticaly put it on the VAT return again nom code of 5101, then I post the admin fee normally £10 to 5101 inthe net column and again I think T0. Once you have done this then if you go into the VAT return via Financials you can have a look at it to make sure its there OK. I always check and its always there so no probs, sometimes my client has a lot of VAT to reclaim so its important it ends up in the right column. This is how I was told to do it so there may be other ways to do it.
The invoices from China shouldn't have any VAT on them for the goods, so post to T0.
Sorry just read you last post, yes thats correct thats how I was told to do it by the accountant. Sometimes you may find that your client will end up with a refund from the VAT as oppose to paying some VAT that quarter. Also you will get a C79 from HMRC to say what VAT wa allocated at customes, this should match the inv from the shipping say for instance DHL. I always check these and the C79 must be kept as well.
Hope that helps, it took me a while to get my head round it first of all.
We deal with purchases and sales all over the world and code our EU Sales for VAT registered customers to T4 this helps with the EC Sales list that is required for VAT registered business and keeps a tab on the Intrastat requirement
Sometimes the shipper pays the import VAT. I have a client that has that arrangement with his shipper. The shipper receiveds the C79, and invoices my client for the VAT he has paid customs. So the invoices come from the shipper for the VAT - not directly from HMRC. I don't use Sage - so instead of a normal nominal code expense account (as there are no expenses) I post it directly to the nominal account for VAT.
