Information

To qualify for this VAT scheme you must meet all of the conditions outlined in the HM Revenue & Customs (HMRC) booklet VAT Margin Scheme for Second Hand Goods, Works of Art, Antiques and Collectors' Items, VAT Notice 718, for example:

 

 

• You must be registered for VAT
• The purchase invoice for the goods must not be a VAT invoice, and mustn't show VAT separately
• You mustn't issue an invoice for the sale of the goods which shows VAT separately
• You must meet all of the record-keeping, accounting and invoicing requirements set out in VAT Notice 718

A copy of this notice can be obtained from your local VAT office. This article is supplementary to the VAT Notice 718, and is a guide to calculating your VAT liability when using Sage Accounts. If you need to clarify any special circumstances please contact your local VAT Office.

The Sage VAT Return can't automatically calculate your output VAT for you, therefore, to calculate your VAT liability, you must:

• Set up the company on Standard VAT to calculate VAT not covered under the scheme
• Use the Output tax reports to calculate VAT under the VAT Margin scheme
• Adjust the figures calculated on the standard VAT Return, by the figures calculated on the Output tax reports

Transactions not covered by the VAT Margin scheme

The following items aren't included in the VAT Margin scheme, and therefore VAT can be reclaimed in the usual way:

• Repairs
• Spare Parts
• Accessories
• Business overheads
• Vehicles bought then broken down for spares or scrap

For further information about items not included in the VAT Margin scheme, please refer to VAT Notice 718.

Any accounting transactions for these items should be recorded in the usual way, as either a supplier invoice or bank payment using the relevant tax code.

 

Set up your company

When you set up your company you must ensure you choose the Standard VAT scheme.

To check or amend this > Settings > Company Preferences > VAT tab > VAT Scheme drop-down list > Standard VAT.

 

Obtain the Output tax reports

The Output tax reports are calculated at 20% tax. If you need to calculate this at a different tax rate you must edit the rate on the report. For more information about how to change this, please contact our Sage technical support.

The output tax reports are featured in the Additional Reports Backup:

• Sage Accounts v21 and above - Additional Reports Backup - This backup is only available to Sage Cover customers. To access it, you must log in

For further information about downloading and installing this reports backup, please refer to article.

 

Create a product record for goods included in the VAT Margin scheme

For the purpose of this article we're recording the purchase and sale of a second hand car under the VAT Margin scheme.

1. Products and services > New.
2. Complete the Product Record window as follows:

   Product Code*	Enter the product code you want to use to identify the item.
   Product type	Select Stock Item
   Description	Enter the description for the item.
   Supplier A/C	Enter the supplier's account reference.
   Tax Code	Enter T9.
   Category	Choose the required stock category for second hand goods. We recommend you use the same stock category for all of your second hand goods as you can then identify the products as a group on the output tax reports.

   *This information is mandatory
   You should create a separate record for each item you're selling. So for example, if you're selling second hand cars, you should create a record for each car.
3. Enter other relevant information as required.
4. Save > Close.

 

Adjust in goods included in the VAT Margin scheme

1. Products and services > Adjustment in.
2. Enter the required information on the Stock Adjustments In window to record the purchase of the item. For example, to record a stock adjustment in for one car valued at £1000.

   Product Code *	Details	Date*	Ref	Quantity*	Cost Price
   CAR	Product description	Date of purchase	Reference	1	1000.00

   *This information is mandatory
3. Save > Close.

You've now recorded an adjustment for the purchase of the second hand car. This transaction hasn't updated your accounts data. To do this you must post either a supplier invoice or bank payment using the non-vatable tax code, which is by default T9.

Create a product invoice to record the sale of an item included in the VAT Margin scheme

1. Customers > New/Edit Invoice.  If you're using Sage 50 Accounts Professional, a sales order can be used in place of an invoice.
2. Complete the Product Invoice as follows:

   Type	From the drop-down list choose Invoice.
   Format	From the drop-down list choose Product.
   Date	Enter the date of sale.
   A/C	Enter the required customer account reference. If an account hasn't been set up for the customer you must create one now.
   Product Code	Enter the required product code.
   Quantity	Enter a quantity of 1.
   Price	Enter the relevant selling price.

3. On the Product Code > press F3, to open the Product Item Line > enter the tax code as T9 > OK.
4. Save > Close.

The nominal, customer, and stock records are only affected when the invoice is updated.

 

Use the Output tax reports to calculate VAT due on items included in the VAT Margin scheme

When using the VAT Margin scheme, to ensure the correct VAT is recorded, and paid, you must:

• Run the relevant Output tax reports
• Once you've obtained the VAT figures, you can either manually add them to the box 1 and 4 figures on the VAT Return produced by Sage Accounts, or you can post a journal to add the box 1 figure into your VAT Return the next time it's calculated
• The Output tax reports also show the gross sales and gross costs for each month. These figures are used to manually correct the box 6 and 7 figures on the VAT Return produced by Sage Accounts

Run the Output Tax reports

The Output tax reports calculate the total sales, total purchases and any output tax due on second hand goods for the specified period. There are 12 monthly reports. If you are calculating your VAT for more than one month you must run the relevant reports for the period, then add the figures together to produce your output tax due for the VAT period.

1. Transactions > Reports > VAT Scheme Reports.
   If the VAT Scheme Reports aren't showing, and you've already restored the Sage 50 Accounts - Additional Reports Backup, they may have been placed in the wrong folder. To resolve this:

   Report	Filename
   Output tax (VAT 20% & Reclaim) month 01	OUTTAX1_VAT20.REPORT
   Output tax (VAT 20% & Reclaim) month 02	OUTTAX2_VAT20.REPORT
   Output tax (VAT 20% & Reclaim) month 03	OUTTAX3_VAT20.REPORT
   Output tax (VAT 20% & Reclaim) month 04	OUTTAX4_VAT20.REPORT
   Output tax (VAT 20% & Reclaim) month 05	OUTTAX5_VAT20.REPORT
   Output tax (VAT 20% & Reclaim) month 06	OUTTAX6_VAT20.REPORT
   Output tax (VAT 20% & Reclaim) month 07	OUTTAX7_VAT20.REPORT
   Output tax (VAT 20% & Reclaim) month 08	OUTTAX8_VAT20.REPORT
   Output tax (VAT 20% & Reclaim) month 09	OUTTAX9_VAT20.REPORT
   Output tax (VAT 20% & Reclaim) month 10	OUTTAX10_VAT20.REPORT
   Output tax (VAT 20% & Reclaim) month 11	OUTTAX11_VAT20.REPORT
   Output tax (VAT 20% & Reclaim) month 12	OUTTAX12_VAT20.REPORT

   1. Help > About > Features Enabled > Use Data Path for Reports.
   2. Depending on the result for Use Data Path for Reports, copy the VAT SCHEME REPORTS folder from the current location to the new location:

      Use Data Path for Reports	Current location	New location
      Yes	The reports are stored in the company folder, for example, if the data path is S:\COMPANY.005\ACCDATA, the path to copy the reports from is S:\COMPANY.005 \Reports\FINANCE	The reports are stored in the company folder, for example, if the data path is S:\COMPANY.005\ACCDATA, the path to place the reports to is S:\COMPANY.005 \Reports\Transactions
      No	C:\ProgramData\Sage\Accounts \2015\Company.000\Reports \FINANCE	C:\ProgramData\Sage\Accounts \2015\Company.000\Reports \Transactions

2. Select the Output tax report for the relevant month > set the Output to Print > Generate Report.
3. In the boxes provided, enter the stock codes which are set up as second hand goods > OK.
4. Complete the Print window as required > OK.
   
   Repeat steps 2 - 4 for any other months in your VAT quarter.

   If you've sold goods included in the Margin scheme at a loss you're not entitled to offset the loss against the profit you make on other goods.

Post a journal to record the VAT to be paid on your next VAT Return

In this example, the Output tax report calculates VAT to be paid to the HMRC as £150.00. This journal also updates the Sales nominal code that was used when the car was sold. If you produce monthly management reports, you should post this journal on a monthly basis before printing your management reports. Otherwise, they can be posted at the end of each VAT period.

1. Nominal codes > Journal entry.
2. Enter the date and reference for the journal, then enter the relevant details to record the output tax, for example:

   N/C	Name	Details	T/C	Debit	Credit
   2200	Sales Tax Control Account	VAT Liability	T1		150.00
   Sales nominal code	Sales nominal code	VAT Liability	T9	150.00

3. Save > Close.

You have now posted the journals to move the VAT amount from the original Sales nominal code to the Sales Tax Control Account. The next time you run your VAT Return this amount appears in box 1.

Correct the box 6 and 7 figures

1. Box 6 - To calculate the value to correct box 6.
   • Calculate the net sales figure for the month by subtracting the VAT on Profit figure from the Sales figure.
   • Add together the net sales figures for all of the relevant months.
2. Box 7 - To calculate the value to correct box 7.
   • Add together the costs figures for each of the relevant Output Tax reports.
3. VAT > VAT Return > enter the dates for the VAT period > Calculate VAT Return
4. Make adjustments > double-click the figure in box 6.
5. Double-click the figure in box 6 > enter Margin scheme in the Reason > enter the value you calculated in step 1 > Save.

    

6. Double-click the figure in box 7 > enter Margin scheme in the Reason > enter the value you calculated in step 2 > Save > Close.
7. Reconcile your VAT Return as normal.

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