Set up VAT rates

Find this screen

Open: Settings > Organisational and Financial > VAT Rates.

How to

Create a VAT rate

Open: Settings > Organisational and Financial > VAT Rates.

To create a VAT rate:

  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. To specify how this tax rate is to be treated for processing, select the appropriate option from the Terms list.

    For detailed information about which terms to use, see Set up VAT rates.

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

    You don't need to enter the percentage sign, or extra zeros after the decimal point. For example, if the tax rate percentage is 20.00%, just enter 20.

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

    • 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.

Note: Remember, changes to the VAT rate % will affect your VAT Return.

Add new VAT rate codes after the Brexit transition

We've added some new default VAT rate codes for the UK and Ireland, to reflect how countries will trade after the Brexit transition.

If you import or export goods and services after the Brexit transition ends, you should add these new VAT rates to all your Sage 200cloud companies.

Open: Settings > Organisational and Financial > VAT Rates.

  1. Select Create Import/Export VAT Rates.

    • New VAT rate are added to the list:

      • 16 - Purchase Services ROW (Reverse Charge) (used by UK only): Purchase of services from all countries outside the UK that you account for under the reverse charge procedure.

      • 18 - Import Goods ROW - Postponed VAT (for UK and Ireland): Purchase of goods from all countries outside the UK (including EU) with VAT charged, using postponed VAT accounting.

    • If you already have VAT rate codes for 16 and 18, the new code will be highlighted as already in use. You'll need to change the generated Code to a different number. The code number doesn't matter, as it's the Terms setting that affects your VAT return.
  2. Set your Input Code and Output Code for the new rates, if you want to change these from the default nominal accounts (Default VAT Input and Default VAT Output).
  3. Select OK to save the new VAT rates.

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

When you create a new company, we include these VAT rates for you:

Country Code Name Comments
UK and Ireland (ROI) 0 Exempt
  • Exempt from VAT. Set at 0%.
UK and Ireland (ROI) 1 Standard Rate
  • VAT at the standard rate (20% UK, 23% Ireland).
UK and Ireland (ROI) 2 Zero Rated
  • Vatable, but zero rated at 0%.
Ireland (ROI) and Northern Ireland only 4

EC Sales Goods

  • Sales of zero-rated goods and services to the EU. Set at 0%.
Ireland (ROI) only 5

EC Sales Services

  • Sales of non-related services to EU. Set at 0%.
Ireland (ROI) only 6

EC Purchase Services

  • Purchase of non-related services from the EU. Set at 0%.
Ireland (ROI) and Northern Ireland only 7

EC Zero Purchase

  • Purchase of zero rated goods and related services from the EU. Set at 0%.
Ireland (ROI) and Northern Ireland only 8

EC Standard Purchase

  • Purchase of Vatable goods and related services from the EU. Set at the standard rate 20% Northern Ireland, 23% Ireland.

UK only

16 Purchase Services ROW (Reverse Charge)

For the UK:

  • Purchase of services from all countries outside the UK that you account for under the reverse charge procedure.
  • Set at the standard rate 20%.
  • Affects UK VAT Return boxes: 1, 4, 6, 7.

UK and Ireland (ROI)

18 Import Goods ROW - Postponed VAT

For Great Britain (England, Scotland, Wales):

  • Purchase of goods from all countries outside the UK (including EU) with VAT charged, using postponed VAT accounting.
  • Set at the standard rate 20%.
  • Affects UK VAT Return boxes: 1, 4, 7.
  • Use instead of VAT rate code 8.

For Northern Ireland:

  • Purchase of goods and related services from all countries outside the UK and EU with VAT charged, using postponed VAT accounting.

    Note: There are no changes in VAT treatment for the movement of goods between Northern Ireland and the EU, so you would still use VAT code 8 for EU countries.

  • Set at the standard rate 20%.
  • Affects UK VAT Return boxes: 1, 4, 7.

For Ireland:

  • Purchase of goods and related services from all countries outside Ireland and the EU (such as GB) with VAT charged, using postponed VAT accounting.
  • Set at the standard rate 23%.
  • Affects Irish VAT Return boxes: T1, T2, PA1.

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

You can create your own VAT rates if you need new ones.

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

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.

Applying Term codes to your VAT rates

VAT rates have a Terms setting which controls how the rate is treated for processing.

You should select the appropriate term according to your business:

UK

Ireland or Northern Ireland

For more information, see Trading in EU countries.

Purchase of goods from abroad using postponed VAT accounting

Postponed VAT accounting allows businesses that import goods to account for import VAT on their VAT return, rather than paying import VAT on or soon after the time that the goods arrive at the border.

From 1 January 2021, if your business is registered for VAT in the UK or Ireland, you’ll be able to account for import VAT on your VAT Return for goods you import into:

  • Great Britain (England, Scotland and Wales) from anywhere outside the UK (including EU members).

  • Northern Ireland from outside the UK and EU. You will not change how you account for VAT for movement of goods from the EU.

  • Ireland from non-EU countries.

For more information:

Set up this VAT rate
  • A VAT rate Import Goods ROW - Postponed VAT will be set up for you in any new companies that you set up. If you have an existing company that doesn't include this VAT rate, you can set it up by selecting Create Import/Export VAT Rates. See Add new VAT rate codes after the Brexit transition.

To manually set up a VAT rate for postponed VAT accounting:

  • Create a VAT rate, with Terms set to Import Goods ROW Postponed.

    Code

    Name

    VAT Return

    Terms

    %

    Enter a unique code. Enter a unique name. Select the VAT Return box. Select Import Goods ROW Postponed.

    Enter your local tax rate (20% UK, 23% Ireland).

    • 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.
  • Affects UK VAT Return boxes: 1, 4, 7.

    Affects Irish VAT Return boxes: T1, T2, PA1.

Reverse charge VAT

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

  • Accounting for VAT as a reverse charge on services supplied to a UK business from abroad.

  • Accounting for VAT as a reverse charge on goods or services supplied to an Irish or Northern Irish business from an EU business.

  • Accounting for VAT as a domestic reverse charge to prevent fraud in trade between businesses within the UK centres. This is known as carousel fraud or missing trader intra community (MTIC) fraud.

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

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

Accounting for VAT as a reverse charge when acquiring services from abroad (UK only)

This information describes accounting for reverse charge VAT in the UK for services from overseas suppliers.

See HMRC: Paying VAT on imports, acquisitions and purchases from abroad.

When you buy services from suppliers in other countries, you may have to account for the VAT yourself using the reverse charge procedure (also known as tax shift).

Set up this VAT rate
  • A VAT rate Purchase Services ROW (Reverse Charge) will be set up for you in any new companies that you set up. If you have an existing company that doesn't include this VAT rate, you can set it up by selecting Create Import/Export VAT Rates.. See Add new VAT rate codes after the Brexit transition.

To manually set up a VAT rate for this reverse charge:

  • Create a VAT rate, with Terms set to Purchase Non-Related Services.

    Code

    Name

    VAT Return

    Terms

    %

    Enter a unique code. Enter a unique name. Select the VAT Return box. Select Purchase Non-Related Services.

    Enter your local tax rate (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.
  • Set up the supplier's account details with the relevant country code and their VAT registration number and default VAT rate.
  • Apply the VAT rate you have set up to appropriate suppliers (outside the UK).

    • Purchase Non-Related Services: On the UK VAT Return, the value of the VAT appears in both boxes 1 and 4, and the value of the goods in boxes 6 and 7.

    The reverse charge VAT on your own VAT Return effectively charges you VAT on the goods.

    Note: No nominal postings for VAT are made as the VAT element of the transaction is notional; it is self-cancelling.

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.

Set up this VAT rate

To set up a reverse charge VAT rate for carousel fraud:

  • Create two VAT rates, with Terms set 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 (20%).

    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.
  • 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 Invoice and Order settings, go the Invoice Printing tab, then select Apply reverse charge VAT rules when printing invoice.

Reverse charge VAT rates for the Construction Industry Scheme (CIS)

Sage 200cloud Standard does not support the Construction Industry Scheme (CIS).

The reverse charge VAT rate Terms for CIS must not be used with Sage 200cloud Standard.

  • Do not use the VAT rate Terms for CIS Reverse charge sales and CIS Reverse charge purchases in your VAT rates.

    Although these VAT rate Terms for CIS are listed, you must not use these terms with your VAT rates.

Low Value Import Scheme

Imports into Great Britain from outside the UK not exceeding £135 in value will be subject to new VAT rules.

If you are processing under the Low Value Import Scheme, you should create a new VAT rate.

See the following articles:

For further guidance, see HMRC: Changes to VAT treatment of overseas goods sold to customers from 1 January 2021.

Notional VAT effects on order and invoice totals

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:

Tour Operators Margin Scheme (TOMS)

The Tour Operators' Margin Scheme (TOMS) can be used by businesses with an establishment in the UK who buy travel, holidays and certain other services from an EC member state and sell them to a traveller (a person rather than a business) in the UK. The scheme was introduced as part of the EC VAT system to provide uniformity for all EC member states.

See How to account for VAT using the Tour Operators Margin scheme - UK only.