Sorry to have to resurface these type of questions [I know they have been discussed previously] but Im looking to make a posting rule up for Sage and stick to it.., Do these seem ok to use???
This is based on the assumption that the client Im entering for is VAT registered:
·Payment to a supplier that is not VAT registered [where supply/service is Vatable] T0 [Zero Rated]
·Business Entertainment T0 [Zero Rated]
·Posting of a payment [normally Standard rated]where invoice/receipt is lost/Missing T0 [Zero Rated]
·Posting of a payment [VAT Status unknown]where invoice/receipt is lost/missing T0 [Zero Rated]
I am inclined to disagree with the T9 being used for non vat registered suppliers. Surely any products and services purchased need to be entered on the vat return whether from a VAT registered company or not?
I read another debate somewhere (another forum) that stated if the services/products are vatable (whether or not the company is registered for VAT) they should be classed as a standard vat rated code (T1 in sage) and change the VAT value to 0, as they are indeed vatable items, whether or not VAT is being charged on them; although it was also stated that T0 is accepted by HMRC.
I am certainly no expert, but in the debate I am referring to referred to links from HMRC website stating these points.
I am unable to comment on missing receipts though :)
Regards
Kerry
-- Edited by KerryB on Thursday 16th of February 2012 08:54:56 AM
This is taken form part of the debate I was talking about;
""It has taken a few phone calls but I finally have a consistent approach from HMRC Vat Helpline.
If you are VAt registered and have suppliers made to you by a non vat registered company then they should go down as T1 with no vat to reclaim. (although HMRC did say that are not interested to be totally honest wether T0 or T1 is used so long as there is not VAT reclaimed and the net supply figure goes into box 7).
However from my discussions with them the complete prefernce would be that
T0 is only used where zero rated goods and services have been supplied.
T2 is only used where expemt goods and services have been supplied.
T9 should only be used for goods and services outside the cope of VAT (Wages etc)
T1 should be used for all standard rated supplies if the supplier is not registered themselves then enter zero in the vat box.
This would tie up with how quickbooks works as if you enter using the non-registered VAT code then no VAT is claimed but the net supply goes on the return for box 7.""
Here is a link to the full debate (might take a while to read through it and get your head round it!):
I would agree with the use of the T0 code as you mention.
I would perhaps explore the business entertainment case. I have read somewhere, and confirmed, that with regards to business entertaining that partial VAT is recoverable - if one employee entertains a business client then 50% of the VAT may be reclaimed, if two employees entertain a business client then 66% of the vat may be recalimed. If one employee entertains two business cleinets then 33.33% may be recalimed - hopefully you see the pattern.
I am of the view that T9 is only used for costs that fall outside the scope of VAT such as payments to HMRC for PAYE or VAT, I'm sure that there are others but can't think of them at the momment. Items posted as T9 do not appear on the VAT return and then when HMRC run their sense check calculations that VAT figure bears a relevance to the net purchases figure.
I decided to call the VAT Helpline this morning to see what they would say [wish I hadn't now.....]
I explained two of the scenarios below [Non VAT Registered Supplier & Business Entertainment -Where VAT can't be claimed]
The fairly unhelpful chap I spoke to said that both were 'outside the scope' but should be still be shown on the VAT Return, Box 7,????
When I questioned this by saying if there are deemed outside of scope why do they need to be shown on the VAT return, he didnt really have an answer.
He just said thats the ruling??
I explained that in the software package [Sage] that an outside of scope posting [T9] wouldnt show on the VAT return and his reply was it needs to and suggested I call sage.
I call Sage, they say they cant comment on what Tcode to use for individual postings and suggested I speak to the VAT helpline.
Getting dizzy going around in circles with this.
Kerry have you by anychance got the links to the HMRC site the other post refered to?
The part I quoted was also straight from the horses mouth so to speak (HMRC). there is no doubt about it that different people get and give different information/answers.
I personally, and my predecessor, would and do include non VAT registered invoices on the VAT return (T0 in Sage), and after having a routine inspection last year this was not 'pulled up' as incorrect.
The highlighted part....
sell (or otherwise supply) when you're not registered for VAT - and you don't need to be registered
......is to do with if you are selling, not purchasing. and because the non VAT registered company would not complete a VAT return, this makes sense to me.
It is there to test us and keep us on our toes, I am convinced!
Regards
Kerry
Edit: To add to my post, I have also known others use T9 in Sage and not include in their VAT return without any known consequences. I believe, so long as HMRC get the VAT that is due to them there is no problem (just my thoughts though, I must add)!
-- Edited by KerryB on Friday 17th of February 2012 05:48:21 PM
-- Edited by KerryB on Friday 17th of February 2012 05:59:28 PM
I wonder if Bill will post his experiences when asking HMRC this question?
Back on my hobby horse
In brief, I phoned HMRC twice, got two different answers. The first was that as it was outside the scope of VAT, it is not involved in the VAT process. The second was the polar opposite, and should be included on the return.
I would like to add something to this debate. The only time this seems to ever get raised, is in regard to Sage T codes. The bottom line is that HMRC do not need an analysis, other than if it was input, output or EU related. You could in theory not worry about T0 or T2, as it is irrelevant. Even T1 can be over written if you wanted to change the value. Sage T codes are only really useful for internal analysis, and make for quicker entry posting if defaults are set IMO.
My personal opinion is that supplies made by non vatable entity, is that they are "outside the scope". However, if you resell the goods, and you are a vatable person, it will become VATable, (if it falls within a vatable supply)
For example MOTs are outside the scope but if you sub contract an MOT and charge your customer then it can get complicated, because it can become a vatable supply of a service.
This extract from HMRC, for me covers it
Goods and services outside the scope of VAT
Some goods and services aren't covered by the UK VAT system at all - they're outside the scope of VAT.
You don't charge VAT on goods or services that are outside the scope of VAT. If you buy anything that's outside the scope of UK VAT, you won't be charged UK VAT so you can't claim it back.
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
buy or sell outside the European Union (EU)
sell (or otherwise supply) but not as part of your business - for example, if you occasionally receive income from sources such as leisure activities or hobbies
buy and sell for your own personal use, such as a hobby
When you buy something from a non vatable person, which is outside the scope, I don't see how it comes with in the scope. HMRC are only interested in exempt, or VAT rated goods and services. At the point of supply by a non vatable person the goods/ services aren't any of those. As an example say you buy business cards from a printer, who only does this part time and is not VAT registered. Ordineraly the supply would be standard rated. The supply is not exempt, so you can't use T2, it is not zero rated, so you can't use T0, it isn't a reduced rated, or standard rated because no current VAT rate has been applied, therefore T5/T1, or any other VAT rate isn't applicable.The only time it enters the scope of VAT, is if it sold.
I conceed there are exceptions to this where margin schemes are used, and VAT rules specifically say that all purchases are entered on the VAT return.
Vowed I would not get in to this again but can't help myself
It is there to test us and keep us on our toes, I am convinced!
Regards
Kerry
Edit: To add to my post, I have also known others use T9 in Sage and not include in their VAT return without any known consequences. I believe, so long as HMRC get the VAT that is due to them there is no problem (just my thoughts though, I must add)!
I agree with your edit comment, and add that there are probably many forum members who use either, and have never been pulled up it during an inspection.
Whose going to be the first brave soul to ask during their next inspection
It is there to test us and keep us on our toes, I am convinced!
Regards
Kerry
Edit: To add to my post, I have also known others use T9 in Sage and not include in their VAT return without any known consequences. I believe, so long as HMRC get the VAT that is due to them there is no problem (just my thoughts though, I must add)!
I agree with your edit comment, and add that there are probably many forum members who use either, and have never been pulled up it during an inspection.
Whose going to be the first brave soul to ask during their next inspection
Already been there, the accountant said to use T9 as they were selling food stuff, I did a lot of reading and realised it should be zero rated so spent an inordinate amount of time changing them to T0, when the inspector came I asked about it, he laughed and asked me for a cup of tea. Never did get an answer.
Here we go again, I disagree with Bill on this one because, according to HMRC, the following should be omitted from Box 7
Box 7 The total value of purchases and all other inputs excluding any VAT
Show the total value of your purchases and expenses but leave out any VAT.
You must include the value of:
imports acquisitions from VAT registered suppliers in other EC Member States (that is any figure entered in box 9) 'reverse charge' transactions (see paragraph 4.6)
However, you do not include the value of any of the following:
wages and salaries PAYE and National Insurance contributions money 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, or income which is outside the scope of VAT because it is not consideration for a supply.
No mention of and if the supplier is not VAT registered but the supplies would be subject to VAT if s/he were. Therefore on SAGE if you use T9 these would not appear in Box 7 and I believe that they should.
It's not really about Sage's tax codes but what should/should not appear in Box 7
I know we disagree on this, and I did try and resist getting involved. Honest.
I am still open to being convinced either way but at the moment am in the outside the scope = no return entry camp. I am so hung up on this that it is almost an obsession .
Kerry, I can't get my head round how something can be outside the scope in the hands of the seller but "magically" become inside the scope in the hands of the buyer? It seems odd to me. I've done a bit of research into this since the thread on the ICB forum. I think that actually the purchase should be included on the vat return and part of the confusion comes from HMRC moving to online notices/ advice.
I understand that in the "old" paper based notes that the advice mirrored Sheila's post but since moving to t'internet parts of the old vat notices have been updated independently as quoted by Bill and Kerry and no-one at HRMC takes a holistic view anymore. I've probably explained that really badly but I know what I'm trying to say.
But - having posted that if HMRC found it a major issue we'd all know as the issue would be raised during inspections.
edit: sorry Bill if I've dragged you into this as I remember it being a bugbear of yours. Sometimes I wish the ICB would cover this issue for it's members and that would be the end of it.
-- Edited by ADAS on Sunday 19th of February 2012 11:00:51 AM
__________________
Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
Kerry, I can't get my head round how something can be outside the scope in the hands of the seller but "magically" become inside the scope in the hands of the buyer? It seems odd to me. I've done a bit of research into this since the thread on the ICB forum. I think that actually the purchase should be included on the vat return and part of the confusion comes from HMRC moving to online notices/ advice.
-- Edited by ADAS on Sunday 19th of February 2012 11:00:51 AM
My view is the the seller would not create a VAT return, anything that does not need to go on a VAT return is outside the scope, and because they will not create a VAT return, it is outside the scope!
I can't get my head round how something can be outside the scope when it is purchased then "magically" become inside the scope when the same company then re-sells the same item? When it is sold to a VAT registered company it is a Vatable item to them, whether or not they have paid VAT on the item. If they were to sell it on, they would charge VAT on it.
Just my opinion, and as it makes sense to me, I shall stick to it :)
Kerry
-- Edited by KerryB on Sunday 19th of February 2012 11:46:03 AM
-- Edited by KerryB on Sunday 19th of February 2012 11:55:47 AM
edit: sorry Bill if I've dragged you into this as I remember it being a bugbear of yours. Sometimes I wish the ICB would cover this issue for it's members and that would be the end of it.
-- Edited by ADAS on Sunday 19th of February 2012 11:00:51 AM
You are forgiven Tony.
What really throws me in to tizwaz, is the fact that HMRC themselves, have told me two conflicting things; knowledgeable forum members,whose advise I respect have different views; nobody has been picked up on it in an inspection, whichever method they use
I have even been sad enough to read right the way through the VAT regulations but even there, I could find nothing definitive.
I was going to email HMRC with the question but they will only give a detailed written answer for an actual client. If you use the general enquiry email, they just tell you to refer to the online publications (no help at all )
You don't charge VAT on goods or services that are outside the scope of VAT. If you buy anything that's outside the scope of UK VAT, you won't be charged UK VAT so you can't claim it back.
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
Think Kerry hit upon something here. The passage seems only concerned with selling; not completing a VAT Return.
PS. Thought it was a shame to let this thread sleep for too long :O)
I used Sage 50 Accounts 2010 (Gillian Gilert) as my guide for VAT codes on Sage. I've found it invaluable for £ 10.99 and you could probably get a used copy for less.
I just had a very interesting conversation with an accountant. He said if I am buying goods for resale from a non VAT registered supplier I need to enter the purchase invoice with tax code T1 and enter zero in the vat amount as I still need to show it in box 7 on my vat return. Saying that, I had a vat inspection 2 months ago and all the officer was interested to see was invoices for premises expenses, repairs & renewals, charity payments and entertainment and of course the sales. And it was a 2 days inspection. So I suppose everybody is right as long you are consistent.
As far as the VAT return goes, I don't see that it makes any difference whether you post (talking about Sage here) as T0 or T1 with no VAT - the entries go to the same boxes on the return.
As far as T9 is concerned, in Sage, it's for anything which doesn't appear on the VAT return at all, i.e. wages, dividends, etc.
