Onion - the missing ingredient for Sage Line 50 / Sage Instant accounts packs in Excel

Onion - the missing ingredient for Sage Line 50 / Sage Instant accounts packs in Excel
Full audit trails to underlying transactions from P&Ls, Balance Sheets, graphs, PivotTables, and departmental TBs in a stand-alone Excel file. Aged Debtors and Aged Creditor files too. Free 30 day trials. Download today at www.onionrs.co.uk

Wednesday 21 August 2013

Sage treatment for invoices from suppliers who are not registered for VAT

The following is an excerpt from the TAX_CODE table for the demo company in a Sage Instant Accounts setup:
TAX_CODE
DESCRIPTION
TAX_RATE
VAT_INCLUDE
EURO_SALES
EURO_PURCHASE
RELATED_CODE
RELATED_RATE
T0
Zero rated
0
1




T1
Standard Rate
20
1




T2
Exempt transactions
0
1




T3

0
1




T4
Sales to customers in EC
0
1
1



T5
Lower rate
5
1




T6

0
1




T7
Zero rated purchases from suppliers in EC
0
1

1


T8
Standard rated purchases from suppliers in EC
0
1

1
1
20
T9
Non-Vatable Tax Code
0
0





The Value Added Tax Act 1994, 1994 c. 23, Part I Supply of goods or services in the United Kingdom, Section 4 contains the following:

Scope of VAT on taxable supplies.

(1) VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him.

(2) A taxable supply is a supply of goods or services made in the United Kingdom other than an exempt supply.

Part I, Imposition and rate of VAT, Section 3 of the same act defines a taxable person as follows:

Taxable persons and registration.

(1) A person is a taxable person for the purposes of this Act while he is, or is required to be, registered under this Act.

The HMRC guidance (http://www.hmrc.gov.uk/vat/forms-rates/rates/rates.htm#5) says (emphasis added): "Goods and services that are outside the scope of UK VAT includes anything you: sell (or otherwise supply) when you're not registered for VAT - and you don't need to be registered...".

So, if a supplier is not required to be registered for VAT, and has not done so voluntarily, they are not  a taxable person and any transactions undertaken are outside the scope of VAT on taxable supplies in the UK.

If goods/services are supplied "outside the scope" it follows that they are received "outside the scope". T9 is the code to use for supplies made "outside the scope" of VAT. It is the only code with a 0 in the VAT_INCLUDE column. The 0 means it is omitted from VAT returns altogether.

I've seen all sorts of other approaches that will get the correct net VAT amount (use T0; use T1 but zero out the VAT; use T2) even though the "stats" boxes will incorrectly include purchase amounts "outside the scope" of VAT.  The VAT inspectors may well be relaxed about this but why risk it when T9 will get the job done properly? 

In essence, both the status of the supplier and the nature of the supply determine whether something is VATable - not just the nature of the supply. It is a two stage test.


Possible types of Sage T code Sage T code
supply (ignoring if supplier if supplier is
supplier VAT reg status) is VAT reg'd not VAT reg'd
Standard T1 T9
Reduced T5 T9
Zero T0 T9
Exempt T2 T9
Outside Scope T9 T9

No comments:

Post a Comment