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- Fellow PM.Dip
- Practice Licence
- 78 posts
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I am struggling to decide which tax code to use T0 or T1. If my client is VAT registered and receives an invoice from a supplier who is not VAT registered, should I use Tax Code T1 and zero the VAT out or use Tax Code T0? Any advice or help would be much appreciated.
Thank you
Chris W Green
Edited at 19 Feb 2011 11:46 AM GMT
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Hi Chris
In Sage, I actually use T2 for exempt transactions (eg. bank charges, insurance and non-registered suppliers), keep T1 for vat registered suppliers and T0 for zero rated items (books, food/milk, medical supplies etc).
Do check your tax codes are set to zero before entering any items though!
Hope that helps, but maybe other bookkeepers do something different?
Sadie
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- Companion Fellow PM.Dip
- Practice Licence
- 1137 posts
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Hi Chris
You would use T0 as there is Zero vat , for the vat return the HM are making sure that you are not claiming vat on items where goods are supplied. the goods that have 0% vat if they are registered .
Ian sorry for the confusion have Edited ,to quick to type my answer.
Edited at 21 Feb 2011 10:31 PM GMT
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- Member PM.Dip
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- 43 posts
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Hi Chris, T0 is for zero rated and T9 is for vat exempt, so I have always used T9 for
suppliers who are not registered for vat.
With Sage T9 transactions do not appear on the vat return.
Please someone let me know if I have been doing this wrong.
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I have experience of this withsome of my clients. I use T0 for supplies from non vat registered suppliers and also for zero rated supplies from vat registered suppliers.
This way all relevent purchases will be included in box 7 on the vat form.
I have been involved in 2 vat visits at a couple of clients and the vat man has never questioned any of the above postings.
Always remember to use T9 for bank charges, rent, rates, insurance etc
Hope that helps
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- Member PM.Dip
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- 58 posts
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Ian said:
“Hi Chris, T0 is for zero rated and T9 is for vat exempt, so I have always used T9 for
suppliers who are not registered for vat.
With Sage T9 transactions do not appear on the vat return.
Please someone let me know if I have been doing this wrong.”
This may seem a little pedantic but the exempt code is normally T2 in sage. Exempt transactions do need to show on the vat return even though there is no Vat. T9 is usually used for items that do not need to appear on the vat return - wages, pensions, interest etc. This topic has been a lively debate on another forum recently, at the end of the day some other software doesn't differenciate so much, so providing the vat is accounted for correctly in a very small business a vat inspector probably wont mind how the transaction is coded. However VAT is treated very differently in the case of vat exempt supplies and the amount that can be reclaimes in respect of these supplies. It is therefore, in my opinion, better to keep T2 purely for exempt supplies and purchases so they can be clearly identified.
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- Companion Fellow PM.Dip
- Practice Licence
- 1137 posts
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Hi Anne
Yes it is a good idea to show your vat exempt separate, but I am not sure that you need to keep it as T2 , you can use the configuration settings in sage to set the Vat codes any way you like.
There are a lot of companies for example that use T1 17.5% T2 15% T3 20% T5 for example. Any code can be set as the exempt code.
I think it is very important that these can be be identified as the HM revenue do not have the same skilled people that they used to, and I have experience this and I have seen this issued raised when they try to do the quick calculation to check if yours or your clients return is correct. The HMRC have let go very good people and are not the same or as skilled as they used to be. I make sure I separate everything, the more you do the less opportunity the HM have of accessing or inspecting your client wrongly.
There are many bookkeepers who put in suppliers that are not vat register the vat people do not even notice and have not for many years . All they want to know is what vat is owed. That is not to say you should not do it correctly.
Edited at 22 Feb 2011 04:56 PM GMT
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- Member PM.Dip
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- 58 posts
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Hi Sarah,
absolutley agree, the codes are editable and you can set them up anyway you like (even to be included on the return or not) so no you don't have to use T2 for exempt I just find it easier to remember that way and that's the default setting when first installed (at least mine was) along with T5 at 5% etc etc. I agree too that HMRC are not as fussy as they used to be and their staff less knowledgable but in my experience inspectors are likely to check the box 6 and 7 figures against the company's accounts and variations may need to be explained.
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- Fellow PM.Dip
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- 258 posts
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Hi,
I have always used the T9 code for people who are not VAT registered because no VAT is involved. The T2 code is for Exempt supplies such as certain subscriptions etc., people who are not VAT registered are not exempt from charging VAT, it may be they just haven't reached the threshold yet. Maybe someone at ICB could clarify?
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- Member PM.Dip
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- 58 posts
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Precisley, I don't think anyone has suggested using an exempt code for input or output that falls within the vat regiime as standard rates (wether registered or not). Outputs which are exempt of vat have specific rules in relation to reclaiming the vat that relates to the exempt sales and perhaps this is not the correct thread to discuss. Sage tax codes crop up for discussion on various forums almost daily.
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Hi
I've been looking at Indemnity insurance, could anyone give me some advice ? I have been getting some quotes & they seem to vary so much 
Linda
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Linda said:
“Hi
I've been looking at Indemnity insurance, could anyone give me some advice ? I have been getting some quotes & they seem to vary so much
Linda ”
Hi Linda
I use Trafalgar.uk.com which I found on the ICB Plus web site.
Steve
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