|
|
Hi, having just qualified as a bookkeeper and VAT is not proving to be the simple tax at all!
The rule I use is that I apply the VAT code according to the supply itself. So for instance, the purchase of a standard rate supply, even from a non-VAT registered supplier, is just that - standard rate coded but VAT zeroised. Although there is no VAT recorded in VAT 100 Box 4, the amount should still be included in Box 7.
In respect of exempt supplies, such as purchases of insurance, pensions etc. I would not expect to include them in any totals of VAT 100. However, I am just setting up Quickbooks (Accountant 2013 given out for free at their roadshows) for a new client and the VAT set up in the package is including these items in Box 7.
I've just checked HMRC. It says include items added into Box 4 (OK). But it doesn't specifically mention the treatment of exempt items, only mentions not to include items that are outside scope. So, do exempt supplies get added into box 7 or not?
One further question. As I said, I treat transactions according to the supply itself. So for missing purchase receipts I apply the supply code, but zeroise VAT. These shouldn't be treated as Outside of Scope should they?
If I am getting something wrong, I need to know now :)
Would so welcome some advice!
|
|
|
Supply of goods and services from a non VAT registered business are outside the scope of VAT so should not appear on a VAT return at all.
Hope this helps.
Kris
|
|
|
Well - I've learnt something today - after 8 years of book keeping!!! Exempt supplies don't go on the VAT return...according to the HMRC notes here http://www.hmrc.gov.uk/vat/forms-rates/rates/rates.htm I'm sure QuickBooks puts them on.......I'll have to check that out...!!
In QuickBooks - I always use the N code for non-registered businesses rather than the Z - because Z is still a 'rate' of VAT (even though it's zero!). This then puts it in all the right places on the VAT return too.
When I have a missing receipt - I leave the VAT box blank, and put 'Receipt Needed' in the Memo field so that I can see it easily on reports. Then when I'm given the receipt, I can go back into it and put in the correct rate of VAT.
Good Luck
Carol
|
|
- Member
- Practice Licence
- 124 posts
|
Firstly, the meaning of "exempt items" is "items outside the scope". They are one and the same thing and do not go on the VAT return at all.
If your client is VAT registered, you always need to distinguish exempt supplies/purchases, which do not go on the VAT return at all, from zero rated supplies/purchases, which do. Examples of the former may be some postal charges or insurance or purchases from non-VAT registered suppliers, and of the latter may be sales to EU VAT rated companies, sales outside the EU, many foods, or children's clothes or toys. The HMRC website gives a more extensive list.
The difference on SAGE is between T9 (exempt), T0 (zero rated) and T1 (standard rate). There are also separate codes for sales to EU.
If you client is not VAT registered, you don't, of course, fill in a VAT return at all!
|
|
- Member
- Practice Licence
- 88 posts
|
Playfair Bookkeepingsaid:
“Hi, having just qualified as a bookkeeper and VAT is not proving to be the simple tax at all!
The rule I use is that I apply the VAT code according to the supply itself. So for instance, the purchase of a standard rate supply, even from a non-VAT registered supplier, is just that - standard rate coded but VAT zeroised. Although there is no VAT recorded in VAT 100 Box 4, the amount should still be included in Box 7.
In respect of exempt supplies, such as purchases of insurance, pensions etc. I would not expect to include them in any totals of VAT 100. However, I am just setting up Quickbooks (Accountant 2013 given out for free at their roadshows) for a new client and the VAT set up in the package is including these items in Box 7.
I've just checked HMRC. It says include items added into Box 4 (OK). But it doesn't specifically mention the treatment of exempt items, only mentions not to include items that are outside scope. So, do exempt supplies get added into box 7 or not?
One further question. As I said, I treat transactions according to the supply itself. So for missing purchase receipts I apply the supply code, but zeroise VAT. These shouldn't be treated as Outside of Scope should they?
If I am getting something wrong, I need to know now :)
Would so welcome some advice!”
Hi
I read your post the other day, and having read various replies over the years to this question, and looked at my various packages that I use I decided to speak to HMRC to check!!
This is the advice that I was given :-
Exempt sales from the business go in box 6 - no VAT in box 1
Supplies to the business from non-vat registered businesses which fall under the VAT scope go in box 7, but no VAT in box 4.
Exempt supplies to the business should not go in box 7, but they are not affecting anything if they are in this box. I note that all the bookkeeping programmes seem to default these exempt supplies into box 7!!
So thank goodness I have been doing it correctly all these years 
I also do exactly what you are doing with missing purchase receipts!
Good luck - if you want any more help let us know.
|
|
|
I have to disagree. "Exempt" and "Outwith the scope" are two different things. In SAGE exempt is T2 and outwith the scope is T9. The reason for this is 'outwith the scope' is a transaction that has nothing to do with sales (and thus sales tax) e.g. tax payments, dividend payments, wages etc etc. Outwith the scope is thus not included in the V100 but exempt is, or should be.
The reason for the difference between 'zero rated' and 'exempt' is that threshold turnovers are based on the turnover of vatable sales (whether that is zero or standard rated). Exempt sales are excluded from threshold turnovers. So it is possible to have a business with a T/R of well in excess of the threshold but because the vatable turnover is less, they don't have to register. In view of the work taken to gather VAT accurately it is worth knowing exactly when a business needs to register and when it does not.
This is a common mistake and even some commercial software gets this wrong (without naming names. especially some antipodean ones I've come across). And that's before we get into EU acquisitions and disbursements!
|
|
- Member
- Practice Licence
- 124 posts
|
Thanks for the helpful clarification!
|
|
|
Hey guys and girls,
Thank you SO much for your responses! What a relief, I was starting to get nightmares about VAT! But you have put my mind at rest :)
(Louise: Yes! this was exactly what HMRC told me ... but then I got all confused again when I started using Quickbooks!)
Have a lovely Christmas and Prosperous New Year all!
Best wishes
Jill
|
|
- Member
- Practice Licence
- 88 posts
|
Playfair Bookkeepingsaid:
“Hey guys and girls,
Thank you SO much for your responses! What a relief, I was starting to get nightmares about VAT! But you have put my mind at rest :)
(Louise: Yes! this was exactly what HMRC told me ... but then I got all confused again when I started using Quickbooks!)
Have a lovely Christmas and Prosperous New Year all!
Best wishes
Jill”
LOL Jill - no good having nightmares!! They did say it doesn't matter if the figure goes in box 7! To be fair, government departments are good at confusing you - glad I don't do tax as well. Leave that to the accountants!!
Merry Christmas to you too
regards
Louise
|
