Sage hints and tips: VAT and tax codes

Our latest hints and tips on VAT and tax codes for Sage 50 accounting software users

With increasing cross-border trading and ever changing local regulations, it is important to keep your VAT settings up-to-date and have your software correctly configured for the appropriate tax code, but which tax code should you use?

VAT codes are profiled in the configuration editor, which is accessed through settings on the main toolbar. Some of these codes, such as T0 zero rated, and T1 standard rated, are easily understood. Others have a specific purpose and act as filters for reports such as EC sales list and Intrastat. The most commonly used default codes are as follows:

T0 – Zero rated sales and purchases

T1 – Standard rated sales and purchases

T2 – Exempt sales and purchases (e.g. to/from non-registered traders)

T4 – Sale of goods to registered business in EC

T7 – Purchase of goods from registered business in EC that would be zero rated in UK

T8 – Purchase of goods from registered business in EC that would be standard rated in UK

T9 – All transactions outside the scope of VAT

T20 – Reverse charge code

T22 – Sale of services to registered business in EC

T23 – Purchase of services from registered business in EC that would be zero rated in UK

T24 – Purchase of services from registered business in EC that would be standard rated in UK

Common queries:

Sales where place of supply is outside EC
Sale of goods zero rated use T0
Sale of services outside the scope use T9 (even if customer is in UK)

Supplier is not registered
If nature of goods or services are within the scope of VAT then use T2
If nature of goods or services are outside the scope of VAT use T9

Travel
Normally zero rated if supplied direct from the operator use T0
Normally standard rated if disbursed as part of other services use T1

Mileage allowance
Normally outside the scope use T9, but can separate petrol element and recover VAT at standard rate T1

Insurance
Exempt use T2, insurance premium tax is not recoverable

Bank interest and charges
Financial charges are normally exempt use T2
There are exceptions such as an audit letter which is standard rated T1

What is outside the scope of VAT in UK
Dividend payments, loan advances & repayments, PAYE and other taxes, net pay, most journals (because they are adjustments not prime entries).

For more information

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