VAt - T0 or T9 - The Book-keepers Forum

Fabatforty · Newbie

VAt - T0 or T9

MarkS · Guru

Hi There

If the company isnt registered for VAT then you can use whatever code you wish as it wont make any difference as the T codes are only of importance if you are doing a VAT return. Doesnt have any other affect.

Personally i would code as T9 when posting a non VAT registered business.

Regards

MarkS

Bucks Bodger · Veteran Member

I was going to post the same reponse as Mark, but then I wondered if the original poster meant
posting invoices from a non-VAT registered supplier into a VAT registered business, which as we
all know will spark yet another debate about whether they should be coded as T0 or T1 with
zero VAT (my opinion is it doesn't make any difference to the figures on the VAt return so either
is OK)

Fabatforty · Newbie

Thanks all - yes it is as Buck says - posting from a non-registered supplier into a VAT registered business. I have been posting as T0 so hoping this is ok !

Ps loving the forus - it is sooooo useful.

Becs

MarkS · Guru

Sorry misunderstood the question.

If posting for a VAT registered company for a non VAT registered supplier then i would post as either T2 (exempt) or T9 (outside the scope of VAT). Personally i would post as T9.

If you post as T0 (zero rated) then it is going to appear on box 7 of the VAT return which cant be right as it isnt a taxable supply.

At the end of the day wouldnt get too hung up on it either way as most important thing to get right is Box 4 (how much VAT to pay). Box 6 and 7 are just used for statistical purposes by HMRC and i am sure they wouldnt bother either way if you included the cost or not.

Regards

MarkS

Stardoe · Guru

Hi there,

I would post non VAT registered company invoices as T1 but with 0 in the VAT column on the premise that it would be a taxable supply if the business was VAT registered

But as Mark said, boxes 6 and 7 are just used for statistical purposes anyway, so it doesn't really matter.

Quickbooks has a much better way of coping with this with a "N" VAT code for Not Registered!

Pauline

Donna CBK · Senior Member

Sorry but I am left totally confused with this. I have read the question as:
You have a set of accounts for a VAT registered company - you are questioning which VAT code to enter the Supplier invoice into the Accounts. If this is correct then you will need the amount shown on the VAT return to statistic purposes and therefore tax code T0 or as stated T1 with £0.00 VAT would be used. T2 is for exempt items like post, childrens clothing, bank charges etc.
The full list is under Tools / Configuration / Tax Codes.

Wella · Expert

I am really going to stay out of this one

MarkS · Guru

Hi Donna

VAT is usually something that can easily confuse most of of.

The question as i understand it is if you have a VAT registered client and they have an invoice from a non VAT registered person how should that be coded.

Basically comes down to the question is a supply from a non VAT registered supplier which if they had been VAT registered would have been VATable a taxable supply or not?

Personally i would say it is outside the scope of VAT and should be coded T9 using the following taken from HMRC website

"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 "

See the link for more info

http://www.hmrc.gov.uk/vat/forms-rates/rates/rates.htm

Regards

MarkS

Figurate · Senior Member

Wella wrote:
I am really going to stay out of this one

LOL

Wella · Expert

Must resist

Rhianrach · Guru

Go on, you know you want to.

ADAS · Guru

Wella wrote:
I am really going to stay out of this one

biggrin first person I thought of when I saw this thread.....

Donna CBK · Senior Member

If only I was Wella!

I agree totally on no VAT to reclaim and therefore nothing in box 2 but Ive always believed they collect info on the VAT return to find out Net purchase amount of purchasing goods hence my reasoning for understanding it should be on the vat return. I have emailed sage to see there clarification as if Im incorrect I need to advise my clients too.

Don Tax · Guru

I'm still of the opinion that the problem lies with one of definitions; specifically the 1994 act which states that "a taxable person is one that is registered for VAT for the purposes of this act"

That doesn't mean to say that an-unregistered trader does not make taxable supplies. Comparitively, this taxable person definition given in the 1994 Act is extremely narrow and I think the Finance Act is much broader and correct.

If the supplies of an un-registered trader were outside the scope of VAT like wages, no one would ever reach the registration threshold. Therefore, you should include supplies from un-registered traders in box 7 where a taxable supply has been made to you. I understand that is T1 with 0 zero vat in Sage.

Over to Bill. I can feel your will-power deserting you lol

Regards,

Tim

ADAS · Guru

Don Tax wrote:
I'm still of the opinion that the problem lies with one of definitions; specifically the 1994 act which states that "a taxable person is one that is registered for VAT for the purposes of this act"

I agree with Tim, I think the problem has been further compounded by the introduction of the HMRC website. I think guidance is updated piecemeal and it leads to contradictions.

I think I've changed my mind a few times on this but I think if it was a major concern to HMRC we'd all know about it. I don't recall it ever being mentioned during a vat inspection except when I asked an inspector and they said it should be included. But I'm aware of the contradiction Bill has experienced.

Wella · Expert

VinceH · Senior Member

FWIW, for all the time I've been using Sage, I have always used T0 for the case of supplies that would attract VAT if the supplier was VAT registered, but isn't.

There are a couple of simple reasons for preferring this over T1 with zero VAT, and the first of these is that for the latter, I'd have to put a little extra effort in: to actually zero the VAT amount in those cases before going onto the next line/transaction. Another one is performing simple 'at a glance' checks. If T1 is used exclusively for for standard rated supplies from VAT registered suppliers, then I can glance at the summary report and say "T1 shows £10,000 net supplies, but only £1800 VAT - oops, something's gone amiss!"

Remember, with Sage's default settings, T0 is shown on the VAT return, and as far as Mr VAT Man is concerned, that's what's important: Not how you handle it internally. As long as those supplies are shown correctly on the return, that's what matters.

-- Edited by VinceH on Saturday 19th of May 2012 03:23:02 PM

Kittycat · Member

Hi I am new to Sage Instant, but reading the above posts, I would have to agree with VinceH, my reasoning is that the item the supplier is selling is a standard rate of vat (they just can't claim it back) and therefore if you use T0 the item will show for HMRC's statistics and if you then only put through reclaimable vat on T1 when it comes to checking vat net x 20% the figures add up. (Sometimes if it way out, HMRC pick up on this)!

Don Tax · Guru

Can't seem to find the thread at the mo. but someone gave an example recently of a Retail Scheme. If purchases from an un-registered trader are excluded, then the proportion of zero purchases will be skewed.
Tim

K3 Accounting · Veteran Member

Where are Wella, Chris and Shaun when you need them...............I remember that thread but can't remember the outcome and / or who voted for each scenario.

My tuppence worth.....

As said it is the end result that matters i.e. VAT Man just wants to know he has received the correct amount of tax. If you can justify your input method one way or the other then I'm sure you will be fine (caveat, don't sue me if not)

I was Sage trained to use T9 for a purchase from a non-vat registered supplier, or a personal 'non-business' supply as 'out of the scope of vat'

T0 is for Zero rated purchase i.e. they are vatable items, just happen to have a zero percentage ........books, food (not pasties

)

T2 is exempt such as bank charges.

Both of the above are 'within the scope of vat' but have zero % applied to them which is where the argument for using of either of these for a non-business or non -vat registered business purchase fall down.

I can see why people use T1 then delete the VAT, but two things (for me) against this.....bigger opportunity for mistake as you are setting the supplier up as T1 by default and then having to remember to delete the vat out, and two you are recording the fact that the supplier is inside the scope of vat - which they are not.

The VAT registration argument falls down as that is only concerned with sales revenue so is not affected by your purchase of VAT / non VAT products.

.......more like a quids worth of views, and are just my own so take your own advice before proceeding down your chosen route........

Ken

Don Tax · Guru

Yes, this doesn't make much difference except for the Retail and any other scheme that requires total purchases. My use of wages was merely saying that if the supplies of someone unregistered were really outside the scope, then, by definition, he will never be required to register -- because his supplies are outside the scope of VAT.

Wages really are properly outside the scope, (being a close and continuing arrangement not taxed under a turnover tax but under income tax) and wouldn't affect, say a Retail Scheme calculation.

So that is 2 instances which prove it is inappropriate for the 1994 VAT Act to use registration as defining the taxable person. UK legislation is literally re-defining VAT itself and we've forfeited the right to do that.

So we can't rely on UK legislation, and we know better than to rely on HMRC guidance. We need to go back to first principles which must be EC directives.

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31977L0388:en:HTML

ARTICLE IV TAXABLE PERSONS - couple of screens down.

3. Member States may also treat as a taxable person anyone who carries out, on an occasional basis, a transaction relating to the activities referred to in paragraph 2.............

No mention of being registered for VAT because that definition is only for the purposes of the 1994 Act. In fact, quite the opposite in 3.

One can't blame Sage for training students to use T9 but it would be more accurate to use another T code for supplies from an unregistered trader. The registration threshold could be lowered at any time but the nature of the transaction wouldn't change.

kind regards,

Tim

Donna CBK · Senior Member

apologies for not coming back sooner but head else where for a few days. I have a reply from Sage priority Link which basically confirms they are not willing to commit - by looks of things I dont actually blame them. May eventually ring ICB or AAT helpline and try that route.

Thank you for your email.

In this instance, I would recommend that you contact HMRC for advice as to whether the transaction should appear on the VAT return. Information we have regarding which tax code to use in which circumstances is fairly limited, and we can only offer advice about which tax code to use if you know which box on the VAT return should be affected.

Wella · Expert

Donna CBK wrote:
In this instance, I would recommend that you contact HMRC for advice as to whether the transaction should appear on the VAT return. Information we have regarding which tax code to use in which circumstances is fairly limited, and we can only offer advice about which tax code to use if you know which box on the VAT return should be affected.

Good luck with that. The main cause of my confusion on this was that i rang them twice, and got two different answers. One said outside the scope, the other inside.

Oops, I made a comment on the subject biggrin

Bill

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