Create a customer house account

1. Customers > New/edit drop-down > New.
2. Complete the Customer Record as follows:
   

   A/C	Enter the account reference for the house account, for example, HOUSE.
   Name	Enter the account name, for example, House Account.

   Complete any other information, as required.
3. Save > Close.

You've created the customer house account.

Create the new nominal codes

To post transactions for the apportionment retail scheme, you should set up the following nominal codes:

Sales nominal code

When you post your sales transactions, we advise you to use the standard rate tax code, T1 by default. This means that 20% of your gross sales is posted to the Sales Tax Control Account. When you calculate your output tax, the VAT figure will probably be lower than that in the Sales Tax Control Account. This also means that your net sales have been understated. To correct this you need to move the relevant amount to a new nominal code.

If you're using the Sage default nominal ledger structure we suggest you use the following nominal code.

Nominal code	Name	Management report	Section of report
4498	Apportionment Sales VAT	Profit and Loss	Sales

Purchase nominal code

When posting a purchase received for retail sales, you should create a unique nominal code to post your transactions to. This is so you can report on the total purchases in relation to the retail sales scheme.

If you're using the Sage default nominal ledger structure we suggest you use a nominal code within the 5000 nominal range.

Create a new nominal code

1. Nominal codes > New.
2. Complete the details as follows:
   

   N\C	Enter the nominal code number you want to create, for example, 4498.
   Name	Enter the name of the account, for example, Apportionment Sales VAT.

3. Save > Close.

You've created the new nominal record, and should now check the chart of accounts to ensure the new nominal code is included. Read more >

Create a lower rated goods tax code

1. Settings > Configuration > Tax Codes tab.
2. Select T3 > Edit.
   
   If you already use T3 for something else, you can choose a different tax code, however you must amend the Daily Gross Takings and Retail Schemes - Apportionment 1 Goods for Resale reports, replacing T3 in the filter with the new code. To do this, edit the report, click Report > Filters > replace T3 with the new code.
3. Complete the Edit Tax Code window as follows:
   

   Code	This box is automatically updated by Sage Accounts and displays the tax code.
   Rate	Enter the VAT rate this tax code is to apply to transactions, for example, to set up a 5% VAT rate, enter 5.00 in this box. NOTE: If you select the EC Code check box, the Rate box isn't available.
   Include in VAT Return	To include transactions with this tax code in the VAT Return, select this check box.
   Description	To add a description to your tax code, enter the relevant description in this box.
   EC Code	Don't select this check box.

4. OK > Apply > Close.

You've now created a new lower rated goods tax code.

Record your purchases received for retail sales at standard rate, lower rate and zero rate

When posting a purchase received for retail sales, you must post it to the nominal code you set up for purchases received.

When a purchase received for retail sales is recorded you should post either:

• PI - A purchase invoice with either the standard rate, lower rate or zero rate tax code, as applicable.
• BP - A bank payment with either the standard rate, lower rate or zero rate tax code, as applicable.
• CP - A cash payment with either the standard rate, lower rate or zero rate tax code, as applicable.
• VP - A visa payment with either the standard rate, lower rate or zero rate tax code, as applicable.

When a purchase for retail sales is returned, you should post:

• PC - A purchase credit with either the standard rate, lower rate or zero rate tax code, as applicable.

Enter retail sales for vatable goods under the Apportionment Retail scheme

• When a retail sale is made for vatable goods, a bank, cash or visa receipt should be posted.
• When a credit sale is made for vatable goods, a sales invoice should be posted.
• When credit sale goods are returned, a sales credit should be posted.

NOTE: Although you may not know the relevant tax code for the sales transactions, you should always use T1. This applies a standard rate of VAT and updates the Sales Tax Control Account. The Sales Tax Control Account balance is corrected once you've completed the VAT calculations.

Produce the Daily Gross Takings reports

To run these reports you must download and restore the Sage 50 Accounts - Additional Reports Backup. You can download and restore this from www.sage.co.uk/accountsupdates > Reporting updates. Read more >

At the end of each VAT quarter you must produce a list of retail sales in that period. This list is produced by running the Gross Takings reports. There are two Gross Takings reports, one which provides a total for transaction types SI, BR, CR, VR, and one which provides a total for transaction type SC.

1. VAT > Reports.
2. VAT Scheme Reports > Daily Gross Takings report > Print.
3. Enter the date range required, this is usually the VAT period > OK.
4. Complete the Printer window as required then to print the report, click OK.

You've now produced your Gross Takings report, you should repeat this procedure for the Daily Gross Credits report.

When you've produced both reports, you should deduct the total value of the Daily Gross Credits report from the total value of the Daily Gross Takings report. The remaining figure is the value of your Daily Gross Takings, which should be used in your VAT calculation.

Calculate the cost of goods received for retail in the VAT period

Before you apply the VAT Calculations from VAT Notices 727/4, you must ascertain the value of your purchases for retail sale at the different VAT rates.

1. VAT > Reports > VAT Scheme Reports.
2. Select the Retail Schemes - Apportionment 1 Goods for Resale report > Print.
3. Enter the date range required, this is usually the VAT period.
4. Enter the purchase received nominal code > OK.
5. Complete the Printer window as required then to print the report > OK.

You've now printed the Retail Schemes - Apportionment 1 Goods for Resale report.

The totals for standard, lower and zero rated purchases, and the grand total of all purchases appear on this report. This information and the Daily Gross Takings figure is used to calculate your output tax.

NOTE: For further information about the calculation of your output tax, please refer VAT Notice 727 / 4 Retail Schemes: How to work the Apportionment schemes.

Correct the balance on your Sales Tax Control Account

NOTE: In this example the balance on the Sales Tax Control Account is £225. This is made up of standard rate VAT applied to £1,000 sales. The output tax was calculated at £200.To correct the balance on the Sales Tax Control Account you should:

• Post a sales credit to the customer House Account to remove the difference between the balance on the Sales Tax Control Account and the calculated output tax, for example, £25.
• Post a sales invoice to the customer House Account to correct the balance on the House Account, and move the relevant amount of Sales VAT to the Apportionment Sales VAT nominal code.

Post the sales credit

1. Customers > Batch credit.
2. Enter the relevant information to record the credit, for example:
   

   A/C	Date	N/C	Details	Net	T/C	VAT
   HOUSE	Date within the VAT Period	4498	Apportionment Sales VAT	0.00	T1	25.00

3. Save > Close.

This sales credit reduces the balance on the Sales Tax Control Account.

To post the sales invoice

1. Customers > Batch invoice.
2. Enter the relevant information to record the invoice details, for example:

   A/C	Date	N/C	Details	Net	T/C	VAT
   HOUSE	Date within the VAT Period	4498	Apportionment Sales VAT	25.00	T1	0.00

3. Save > Close.

This sales invoice moves the VAT from the Sales VAT Account to the Apportionment Sales VAT nominal code.

Annual Adjustments

Once a year you should make a similar calculation based on your purchases for the year, this is compared with the tax you've paid to correct any over or under payment.

NOTE: If you're using this Apportionment Scheme, you must not use the Clear Audit Trail option within any period to be used when calculating the Annual Adjustment.

Because each tax period can be affected by factors such as seasonal variations, the amount of output tax you pay in each tax period is provisional.

To calculate the Annual Adjustment, you must use the same calculation method used in this article for the whole of the relevant year.

This must be calculated manually, any difference between this figure and the figures you claimed on your VAT return is your annual adjustment.

If you've over paid your VAT, you should post the following transactions:

Type	Customer A/C	N/C	Net amount	T/C	VAT
SC	House Customer	4498	0.00	T1	VAT Amount over paid
SI	House Customer	4498	VAT Amount over paid	T1	0.00

If you've under paid your VAT, you should post the following transactions:

Type	Customer A/C	N/C	Net amount	T/C	VAT
SI	House Customer	4498	0.00	T1	VAT Amount under paid
SC	House Customer	4498	VAT Amount under paid	T1	0.00

Where the VAT amount is the amount of the over or under payment.

You've now accounted for VAT under the Apportionment Retail Scheme - scheme 1 in Sage 50 Accounts.