Forum

• # 95495
• Tue 10 Dec 2013 08:34 AM

Hi All, I am getting myself more and more confused and am hoping that someome can give me a clear and consise answer here! If I am entering a purchase on Sage from a supplier who is not VAT registered and therefore has not charged us VAT what VAT code do I use - is it VAT exempt, No VAT or Zero rated?

Hope someone can help me please.

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• # 95504
• Tue 10 Dec 2013 01:15 PM

Hi Jayne

I would use T9 outside the scope.

Hope that helps

Very best wishes

Lainy xxx

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• # 95513
• Tue 10 Dec 2013 04:47 PM

Hi Jayne

You should be looking at what has been provided to decide which VAT code to use on Sage as the fact they are not VAT registered doesn't mean it is out of scope for a VAT Return.

If the goods or service supplied would incur VAT if the supplier was VAT registered then you should use T1 and then overwrite the VAT figure that Sage calculates with a zero. If the supply would be zero rated use T0.

If you can tell us what the supply was for, we should then be able to give you a better answer.

Hope that helps.

Vik

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• # 95515
• Tue 10 Dec 2013 04:57 PM

>
> Mostly it's for invoices from suppliers for their services as opposed to goods.
>
>

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• # 95520
• Tue 10 Dec 2013 07:52 PM

I'm afraid that I disagree with both answers given already!

If you code it as outside the scope of VAT (T9) then the purchase value will be excluded from the VAT return, which unless it is genuinely an outside the scope purchase, you don't want. 

I also wouldn't use T1 and overwrite the VAT value - I would use T0. This includes it in the purchases value on the VAT return but with no VAT value to reclaim.

I have been processing this way using Sage for many years and have had HMRC inspections which have never criticised the way I work so I know it stands up to scrutiny.

T9 is only used for items such as wages or drawings that are genuinely outside the scope of VAT 

• Bruton Young Bookkeeping
  
  

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• # 95525
• Tue 10 Dec 2013 10:49 PM

Hi,

I agree with Clare and Sharon.

I have also used Sage for many years and had numerous Vat inspections which up to now have had good results!

Marilyn

• A clever person solves a problem.

  A wise person avoids it.

  Albert Enstein

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• # 95527
• Tue 10 Dec 2013 11:04 PM

Hi

I agree with Clare, Sharon and Marilyn and I too have had a couple of vat inspections.

Steve

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• # 95528
• Tue 10 Dec 2013 11:13 PM

First of all, having gone through VAT inspections is not a valid reason for why your method would be the right one. I have gone through VAT inspections and have also never been criticised for my work, yet I work differently to you. HMRC are interested in ensuring that VAT is declared correctly, they are not concerned with it being a T1 or T0 tax code on a Sage report as long as the VAT element was correct. My method comes from the descriptions that Sage uses for the T0, T1 and T9 tax codes and relates to the VAT applicable on the product/service provided rather than the supplier.

Clearly it is a matter of preference and if you browse through some historic threads (here's an example - it won't let me add it as a real link):

'http://my.bookkeepers.org.uk/Forum.aspx?type=&cid=0&tid=83385&lp=85285&page=2&sort=

you will see that we all differ in our opinion on how to process non-VAT registered suppliers.

I have done a lot of browsing tonight and it's been interesting seeing others reasons for or against the different options - however, it is clearly a divided subject open to personal interpretation. Lainy is also not necessarily wrong either in her suggestion of T9, again some agree, some don't, based on the HMRC criteria for an 'out of scope' transaction - which is very hard to pin down on the HMRC website. 

Ultimately Jayne, you have to process it using a method that is best for you and one that you are comfortable with. 

Sorry, if it sounds like a rant but I felt the focus became too drawn on 'I've survived VAT inspections, so I must be right'. In my view, we're all right as long as we're declaring the VAT correctly on the return.

Vik

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• # 95535
• Wed 11 Dec 2013 05:06 PM

My point is that the tax codes in Sage are categorised based on the goods or services suppied, not the status of the supplier. T0 is for supplies that are zero rated, zero rated is not a definition of a supplier who isn't VAT registered. T1 taxable supplies, T2 is for supplies which are VAT exempt and T9 for 'out of scope'.

Based on this, I would process an invoice from a non-VAT registered supplier that provides goods or services which would be liable to VAT if the supplier was registered as T1 and the VAT entered as zero. I would only use T0 if I knew the goods/services supplied were zero rated or T2 if they were exempt from VAT, T9 'out of scope'.

We've clearly been taught different ways and have different methods of processing in Sage, as long as the end result is correct we should all be happy!

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• # 95538
• Wed 11 Dec 2013 08:24 PM

Could it not be regarded as “outside the scope” simply by virtue of the fact that the supplier is unregistered and that therefore VAT does not apply to them? (that’s not meant to be rhetorical, it’s a genuine question)

I think labelling as zero rated looks odd as they are not zero rated purchases (‘zero rated’ goods are defined on HMRC VAT lists and do not include goods purchased from a non VAT-registered supplier). Likewise, labelling them as T1 and overwriting looks odd to me – if there were a need for such a function, would not SAGE provide it as an automatic option?

Although some of you mention having passed HMRC inspections, I would think that HMRC would get into a snit only if you’ve reclaimed VAT on items that you are not allowed to reclaim VAT on, so I would not necessarily regard that as 100% evidence.

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• # 95541
• Wed 11 Dec 2013 11:21 PM

The VAT inspectors that I have come across prefer to see the supply put to the correct code,ie if it is a standard rated supply put to T1 regardless of whether the supplier is VAT registered or not as this would make the audit easier, however, as long as VAT is not claimed they are not unduly worried as to whether it is put to a T9 code or T1, T5 T0!!! 

Personally speaking when I come across this on sage I code to T1 and overwrite to 0 for the VAT, likewise with VT+. 

Danya, my view regardless of whether a supplier (or customer) is VAT registered or not the VAT status remains the same on the goods or services supplied. eg a contractor cutting a hedge would provide a standard rated service regardless of whether or not he is VAT registered, The "net" amount would be coded as T1 and thus appear in box 7 - so if the supplier was not VAT registered and his net supply is £100 this should always appear in box 7. Should he be VAT registered his net supply would be £100, which would appear in box 7, but this time he would have £20 VAT which would show in box 4; so his net supply does not change, only the box 4 figure. That is my view!!

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