What the previous bookkeeper has done isn't necessarily wrong - in fact it's as good a way as any to keep a track of payments for which paperwork is needed, and is likely the reason T9 was used, rather than T0.

(Although as a method of keeping track of them, it only really works if the list is presented to the client regularly with instructions to "Find these!")

As to whether the VAT is claimed or not: As a T9 transaction (assuming the Sage defaults are in place), you are correct that no VAT has been claimed on those transactions. However, you don't say what VAT scheme the client is on - which makes a difference.

If the client is on a cash basis for the VAT, the VAT would normally be reclaimed when a payment is made against a supplier invoice for which there is a VAT element. (And since there is no supporting invoice in these cases, there is no VAT to reclaim - yet.)

If the client is on an invoice basis, however, all payments to the purchase ledger will get a T9 code - whether a payment on account, or one which is allocated to an invoice at the time the posting is made. This is because it's the invoice posting on which VAT is reclaimed.

So the starting point is to ascertain why the supporting invoices haven't yet been found - and to find them if possible. When found, post them as invoices to the relevant purchase ledger accounts, then go in as if to make a supplier payment - but just allocate the existing payments on account to the invoices.

If the client is on an invoice basis for the VAT, it'll let you allocate them.

If not - if it's a cash basis - you can edit the payments on account; change them so that they show the correct net and VAT, and change the tax code (ensuring the total amount remains the same, so as not to upset the bank reconciliation). You can then allocate them against the invoices.

If the invoices can't be found, you'll have to make judgement calls on whether they are legit expenses - but don't claim VAT on them without adequate proof.

Hi Sarah
So at least you have the easier scenario to sort out with it being standard VAT. As Vince said it is when you actually enter the invoice that it is pulled on to the VAT return, and also you will notice as you key it, pull the expense into the relevant expense account.

So yes first things first get all the invoices - tell your client you cant keep his VAT and tax bills down without the purchase invoices - usually spurs them on to helping. With the more difficult ones I have even offered to help do it for them (well its all extra earnings isnt it, if they are prepared to pay of course).

Before you key any of the invoices I would run a backup, then run a VAT report from the last date just up to today and see how many unreconciled items there are. The reason I am suggesting this is because I have taken over a set of accounts before where the unreconciled transactions were never included in the VAT return (ever) and it ran to quite a few entries. If there only one or two then thats fine. If there are a few go into Sage (Audit trail or one of the VAT reports and see how far back some of them go and maybe post on here again).

I am going to assume you dont have many. Do not save that VAT return. If you do by mistake, restore the back up you saved earlier.

Next I am going to assume you only have invoices in THIS financial year - if so, just post away as you would normally including the normal invoices dates. When you are ready to run the VAT return properly you will be asked if you want to include unreconciled transactions from earlier periods - the answer will be yes, because the system will then pick up the invoices in this VAT return and allocate them to the correct part of the VAT return. (Again if you want to see it in action, run a couple of backups, run the VAT return and restore sage if you need to)

Now - the remaining ones might be for a prior year. You can key them as above only IF the year end hasnt yet been sent to the Account to complete (and do as above). If the year end as been finished you CANNOT just key these in otherwise it will skew the figures and create a mess for him to sort out next year end. I would add these invoices up and see if they are considered material to the business. (You will need to have a scoot round the site for materiality, cos I havent got them in my head and cant find my notes, but Shaun (Shamus, the Moderator - not at all as scary as that name suggests!) is your man for this one but he will not touch this post as its Sage related and he cant stand Sage, maybe ask if you cannot find anything).

If the figures are material= speak to the Accountant. If they are not - then key them as the FIRST day of the current financial year in the sage date, adding the actual invoice date in the details field so thy can be pointed out to the Accountant at year end. Then progress as above.

Re the £10k limit you mentioned - that isnt as such a Sage issue, just an issue for you once you have finished as to whether or not you need to report into HMRC for the errors.

BTW - Once you have keyed your first back dated invoice - have a play with sage and see where each entry ends up, ie which nominal, debit or credit and which line of the VAT return in drops into. BACKUP first, but thats a great way of finding out what sage can and does does with each transaction - it all very clever really. (Or try this on your demo data - each sage has one!)