Sage Accounts offers a range of default VAT codes to simplify your accounting and ensure compliance with VAT regulations. Here’s a breakdown of the most common VAT codes and their applications:
Sage Accounts – List of default VAT codes and examples:
T0 Zero rated – Food, Sewage disposal/water, Books, pamphlets and brochures, Newspapers, Maps, Sales outside of EU etc
T1 Standard 20% with effect from 4/1/2011 – all UK Sales
T2 Exempt transactions – 0% Post Office postal costs, Insurance, Bank Charges, Professional memberships, finance charges
T4 Sales to Customers in the EC – where you have received their VAT Code*
T5 Lower Rate – e.g. 5% energy tax
T7 Zero-rated purchases – from suppliers in EC**
T8 Standard-rated purchases – from suppliers in EC**
T9 Transactions NOT involving VAT – Bank Transfers, Salaries, PAYE/etc, Insurance Claims, Loans, Dividends, MOTS, Vehicle Licence duty, Local Authority Rates***
* This tax code can be used for VAT-registered customers outside of the UK but within the EC. You must have the customer’s VAT registration number entered on the customer record if you want to use the T4 tax code. If your customer is not VAT-registered, then you should use one of the standard UK VAT rates.
** These tax codes can be used for suppliers outside of the UK but within the EC. In accordance with VAT regulations, EC VAT rate codes used for purchases are given a ‘notional’ rate that is linked to a UK VAT Rate. For example, Sage 50 Accounts’s T8 rate for suppliers in the EC is linked to T1, which is the standard rate of VAT in the UK.
*** These transactions are not included on the VAT Return. Sage 50 Accounts also uses T9 tax code as the default tax code for all the routines that are non-vatable, e.g. journal entries and error corrections. If you want to change the function of T9 vat code, you will need to set up another tax code that is non-vatable, for your program to use for these routines.
How Can CRM Help?
Our team is equipped to guide you through Sage Accounts, ensuring that your business remains compliant while optimising your accounting processes. As Sage Accountant Partners, our team are up to date with the software provided and are able to pass on many benefits to our clients, such as price savings.
By understanding the correct usage of VAT codes, your business can ensure smooth and compliant accounting practices. For tailored advice and support with Sage Accounts, get in touch today.