Set up VAT rates

Find this screen

Open: Accounting System Manager > Settings > VAT Rates.

How to

Create a VAT rate

To create a VAT rate:

Open: Accounting System Manager > Settings > VAT Rates.

  1. Click Add to add a new row on the table.

  2. Enter a unique code and name.

    This name appears throughout Sage 200cloud, so make sure that the name adequately describes your new VAT rate.

  3. Select the VAT Return box if you want to include the value of VAT accumulated under this code in the VAT Return.

    Note: If you don't select this and post vatable transactions to this code, the results are included in the Non-Trading Vatable Transactions report. This report is produced with the VAT Return, but can also be produced as a separate report.

  4. Specify how this tax rate is to be treated for processing. Select the appropriate option from the Terms list.

  5. Enter the VAT rate %. (0 to 999.99).

  6. Select nominal accounts for the Input Code and Output Code, if you don't want to use the defaults. The values for this rate are accumulated in this nominal account.

    If you do not enter accounts here, they will use the default nominal accounts you have set for Default VAT Input and Default VAT Output.

    If you enter the same nominal account number for both Input Code and Output Code and your company is registered for VAT, the balance of the nominal account will reflect the outstanding net VAT.

Amend a VAT rate

You can change any of the information about the VAT code.

Any changes made will only affect subsequent transactions.

Tip: Remember, changes to the VAT rate % will affect your VAT return.


Useful info

About the nominal accounts used for VAT

Sage 200cloud uses two nominal accounts to record your VAT:

  • VAT Input - for the VAT on your purchases.
  • VAT Output - for the VAT on your sales.

Any VAT entered on a transaction is automatically posted to these nominal accounts. You specify which nominal accounts to use for these on the Default Nominal Accounts screen.

You may also want to have an additional nominal account to records payments made to HMRC.

As long as all your VAT nominal accounts have the same report category, you net VAT liability will be report on your Balance Sheet, so there's no need to journal between accounts.

If you only want to use a single nominal account for your VAT, then you can enter the same nominal account for both VAT Input and VAT Output.

Default VAT rates

We have set up a number of VAT rate codes for you.

UK or EU Code Name When to use this

 

UK

0 Exempt Exempt from VAT. Set at 0%.
1 Std Rate VAT at the standard rate (20%).
2 Zero Rated Vatable, but zero rated at 0%

 

 

EU only

4 EC Zero SL Sales of zero-rated goods and services to the EU
5 EC Service Sales of non-related services to EU.
6 EC Service Purchase of non-related services from the EU
7 EC Zero PL Purchase of zero rated goods and related services from the EU.
8 EC Std PL Purchase of Vatable goods and related services from the EU.

Note:

We advise that you do not amend the general details of these tax rates. The only fields you should update on these rates are:

  • %
  • Input Acc. No
  • Output Acc. No

If you need other VAT rates create new ones.

When to create a new VAT rate

You may find that you need additional VAT rates to the defaults we've supplied.

Depending on what you but and sell you may need to create a VAT rate for reduced rate items and non-vatable items.

Reverse charge VAT

Reverse charge VAT is a term that covers the following scenarios:

  • Accounting for VAT as a reverse charge on goods and services supplied to a UK or Irish business from an EC business.

  • Accounting for VAT as a domestic reverse charge to prevent fraud in trade between businesses within the UK centres involving goods originating from the EC. This is known as carousel fraud or missing trader intra community (MTIC) fraud.
  • Accounting for VAT for the Construction Industry Scheme (CIS) in the UK.

You set up VAT rates differently for each of these scenarios.

For more information on each type of reverse charge VAT, see:

Applying Term codes to your VAT rates

VAT rates have a Term indicator which controls how the rate is treated for processing.

Select the appropriate term according to your business.

UK

Ireland

For more information, see Trading in EC countries.

For examples of VAT rates, and to determine which rates to use, see:

Domestic reverse charge VAT rates for preventing carousel fraud in the UK

This information describes how you set up rates to apply reverse charge VAT to prevent carousel fraud in the UK. See HMRC: Domestic reverse charge procedure (VAT Notice 735).

When you are trading in specified electronic devices (such as mobile telephones and computer chips) in the UK with another UK business and the value of your trade exceeds £5000 for a UK VAT registered customer, you should set up VAT rates to prevent carousel fraud. These VAT rates have not been set up for you.

To set up reverse charge VAT for carousel fraud:

  • Create two VAT rates, with Terms to Reverse charge sales (Mobiles) and Reverse charge purchases (Mobiles).

    Code

    Name

    VAT Return

    Terms

    %

    Enter a unique code. Enter a unique name. Select the VAT Return box. Select Reverse charge sales (Mobiles).

    Enter your local tax rate.

    Enter a unique code. Enter a unique name. Select the VAT Return box. Select Reverse charge purchases (Mobiles).

    Enter 0 (zero) %.

    • Specify Input Code and Output Code nominal accounts, if you want to override the Default VAT Input and Default VAT Output tax nominal accounts in the company's default nominal accounts.

    The VAT rates are used for accumulating values for the EC sales or purchase boxes on the VAT Return for transactions between EC member states. Sage 200cloud uses default codes 4, 5, 6, 7 and 8 for these rates.

  • Ensure that appropriate product groups in Stock Control have Use reverse charge VAT rules enabled. These product groups should be used for all stock items that fall under the reverse charge VAT rules for preventing carousel fraud.
  • For each relevant stock item, enable Use reverse charge VAT rules on the stock item Analysis tab.
  • Open SOP Settings, go the Invoice Printing tab, then select Apply domestic reverse charge VAT rules when printing invoice.

Reverse charge VAT rates for the CIS (UK only)

This feature is only available from Sage 200cloud Professional Summer 2019 version onwards.

As of October 2020, those working in the UK's construction industry might have to handle and pay VAT in a different way following the introduction of the new VAT reverse charge system for the Construction Industry Scheme (CIS).

For supplies of certain specified construction services, the customer will be liable to account to HMRC for the VAT for these purchases instead of the supplier. The reverse charge will include goods, where those goods are supplied with the specified services.

  • For full compliance with the CIS, you will need to use a third-party CIS module for Sage 200cloud.
  • CIS is only applicable for companies in the UK, and not Ireland.
  • The start date for this change to the CIS has been delayed to October 2020 (from October 2019).

If you buy or sell construction services that are affected by the CIS, you should set up reverse charge VAT rates for the CIS.

These VAT rates have not been set up for you. To set them up:

  • Set the VAT rate Terms to CIS Reverse charge sales or CIS Reverse charge purchases.

    Typically you might set up four VAT rates, for sales at 5% and 20%, and purchases at 5% and 20%.

    Code

    Name

    VAT Return

    Terms

    %

    Enter a unique code. Enter a unique name. Select the VAT Return box. Select CIS Reverse charge sales.

    Enter your local tax rate, for example 5% or 20%.

    Enter a unique code. Enter a unique name. Select the VAT Return box. Select CIS Reverse charge purchases.

    Enter your local tax rate, for example 5% or 20%.

    • Specify Input Code and Output Code nominal accounts, if you want to override the Default VAT Input and Default VAT Output tax nominal accounts in the company's default nominal accounts.
What happens when I use a CIS reverse charge VAT rate?
  • The tax rates are used for accumulating values for the CIS reverse charges on the VAT Return.

    • CIS Reverse charge sales affects box 6 of the UK VAT return, and has no effect on the Irish VAT return.
    • CIS Reverse charge purchases affects boxes 1, 4, 7 of the UK VAT return, and T1 and T2 of the Irish VAT return.
  • When you print invoices and credit notes that contain items using the CIS reverse charge VAT rates, a message will added to the footer of the document to indicate that a reverse charge is applicable. The HMRC recommends that this text is included on invoices and credit notes that are eligible for CIS reverse charge VAT.

    You can select the message to display on the Invoice Printing tab in Invoicing Settings or SOP Settings. See Invoice printing.

  • When you enter a sales order, invoice, or a bill, the items cannot contain a combination of VAT rates used for CIS reverse charges with any other VAT rate above 0% (zero).

    If you try to use this combination of VAT rates, you'll see the warning: This document can’t contain items that use this combination of VAT rates. The VAT rates for CIS can’t be used in combination with any other VAT rate that is above 0% (zero).

  • If you have customer accounts that are set up to use consolidated billing, separate invoices will be produced to group orders that use CIS reverse charge VAT rates and any other VAT rate that is above 0% (zero).

Tip: For customers or suppliers in the CIS, it's a good idea to set their account to use a CIS VAT rate by default. To do this, set the Default VAT code on their account Trading tab.

VAT rates for mini One Stop Shop (MOSS)

VAT on the sale of any of any broadcasting, telecommunications and e-services to non-business customers (B to C) in other EU countries is charged in the country where the customer is based.

So that you don't have to register for VAT in every country where you supply these services, you can choose to use the VAT MOSS online service to account for VAT on your e-services.

You won't be able to submit a VAT MOSS return directly from Sage 200cloud, however once you've set up MOSS, you will be able to:

  1. Process transactions using the VAT rate for the EU country where you customer is based.

    To do this you'll need to set up new VAT rates for each country.

  2. Find the value of MOSS transactions to manually add to you VAT MOSS return.

    To do this you'll need to run reports based on the new VAT rates you've created.

See VAT and Mini One Stop Shop (MOSS).

We recommend that you follow the process outlined below:

  1. Create a new nominal account for each EU country that you sell to.

    This is so that the MOSS VAT is reported in a separate nominal account to usual UK VAT.

    If you create a nominal account for each country, you can easily see the total amounts you need for your VAT MOSS return.

  2. Create a new VAT rate for each EU country in which you're going to supply e-services to non-business customers. This is so the correct amount of VAT is calculated.

    Exclude this new rate from your VAT return.

  3. When you sell an e-service to a customer in another EU country, make sure you choose one of the new VAT rates you have set up.

    This makes sure that the VAT is charged correctly.

  4. When you submit your VAT MOSS return to HMRC, use the Report VAT transactions by period report to see a list of transactions for each VAT rate for a selected period.

Notional VAT effects on order and invoice totals

This feature is only available from Sage 200cloud Professional Summer 2019 version onwards.

Notional VAT is tax that should be declared on invoices, but is not payable, nor can be claimed back.

When you use notional VAT rates on orders and invoices, this will affect the VAT, Gross, and order/invoice Total as follows: