VAT calculations on sales orders and invoices

Rounding differences on sales orders

In Sage 200, the VAT on the sales order is calculated using the total net amount entered for goods at each VAT rate. This is in accordance with the HMRC regulations.

This can create small differences between the VAT calculated for the total order and the VAT calculated for each order line. This is due to rounding differences, as VAT is calculated to two decimal places.

Note: If you sell goods at a specified gross price, we recommend you select Prices include VAT on the SOP Settings Processing tab.

1. Add 2 items to an order.

   • The first one for £10.43 plus VAT.

     10.43 x 20% = £2.086. This is rounded up to £2.09.

   • The second one for £0.83 plus VAT.

     0.83 x 20% = £0.166. This is rounded up to £0.17.

   • If you add the two lines together the total value is £13.52.

2. In Sage 200, the VAT on the order is calculated using the total net amount for the goods.

   • Total net amount is £11.26.

     11.26 x 20% = 2.252. This is rounded down to £2.25.

   • Therefore, the total order value is £13.51.

   	Line net	Line VAT	Line total
   Item 1	10.43	2.09	12.52
   Item 2	0.83	0.17	1.00
   Total	11.26	2.26	13.52
   	Order net	Order VAT	Order total
   	11.26	2.25	13.51

   There is a £0.01 difference between both calculations.

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:

• Sales invoices and purchase invoices (entered directly)

  For sales invoices that you enter to the Sales Ledger, and purchase invoices that you enter to the Purchase Ledger, the notional VAT values are not included in the Invoice total.

  • The VAT value you enter will not include VAT for notional VAT rates.

  • The Invoice total value will not include VAT values that are for notional tax rates.

    Note: The invoice document will show the VAT analysis with the actual VAT value.

  • For example, you enter a sales invoice that has a Goods Value of £100, and a VAT value of £20 for a notional VAT rate of 20%. The Invoice total will be £100 rather than £120, as the total doesn't include the £20 VAT for the VAT rate.

• Sales orders and purchase orders

  For sales orders and purchase orders, the notional VAT values are not included in the order's Gross total.

  • The VAT total value will include all VAT totals, including notional VAT rates.

  • The Gross total value will not include values that are for notional VAT rates.

  • For example, you enter a purchase order for an item that has a Goods value of £100, and a VAT value of £20 for a notional VAT rate of 20%. In the order's Totals you will see a Net value of £100, a VAT value of £20, but a Gross value of £100 rather than £120. As the VAT rate is notional, it is not included in the order's Gross value.

• Purchase invoices recorded from purchase orders

  For purchase invoices that you record for a purchase order, the notional VAT values are includes in the Invoice total.

  • The VAT value total should include the order's VAT value for notional VAT rates, so VAT value on the invoice may be different (higher) than what you see on the corresponding purchase order.

  • The Invoice total displayed will also include the notional VAT value, so this may also be different to the total value of the corresponding purchase order. However, this Invoice total amount is not posted to Sage 200, the actual value posted will not include VAT for the notional VAT rates.

    Note: The invoice document will show the VAT analysis with the actual VAT value.

  • For example, if we record an invoice for an order with a Goods value of £100, and a VAT value of £20 for a notional VAT rate of 20%. In the invoice's totals, you would enter a Goods value of £100, and a VAT value of £20 (rather than £0, which is displayed on the order). This will result in an Invoice total of £120. However, when you continue to post and save the invoice, the Invoice total will be £100, as it does not include the notional VAT amount.