Create a customer house account

When you've calculated the amount of VAT that can be reclaimed, to correct your Sales Tax Control Account you should post a sales invoice and credit. To ensure that these new transactions don't affect any of your customers, we advise you to create a new customer 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 successfully created the customer House Account.

Create the new 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. If you've already created this nominal code, please proceed to the following section.

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

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. You must now check the Chart of Accounts to ensure the new nominal code is included. For further information about this, please refer to article .

Create a lower rated goods tax code

If you've lower rated goods, these must be entered using a different tax code. As there isn't a default lower rated goods tax code, you should create one before proceeding.

1. Settings > Configuration > Tax Codes tab.
2. Select the tax code to be amended, for example, T3 > Edit.
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 > No.

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

NOTE: On all transactions recording purchases received for retail sales, you must use the department field to record the mark-up percentage. For example, to record a standard rated purchase invoice for £100 plus 20.00 VAT with a mark-up of 20%, use Department 20 to record the mark-up.

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

• A purchase invoice with either the standard rate, lower rate or zero rate tax code, as applicable.
• A bank payment with either the standard rate, lower rate or zero rate tax code, as applicable.
• A cash payment with either the standard rate, lower rate or zero rate tax code, as applicable.
• 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:

• A purchase credit with either the standard rate, lower rate or zero rate tax code, as applicable. You must enter the same Department as the related purchase invoice.

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 VAT Control Account. The Sales Tax Control Account balance is corrected once you've completed the VAT calculations.

Produce the Daily Gross Takings reports

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.

These reports are only available in the Sage 50 Accounts - Additional Reports Backup, you can download and restore this from the Updates page on support.sage.co.uk For more information about how to download and restore this, please refer to article .

1. VAT > Reports.
2. VAT Scheme Reports > select the Daily Gross Takings report > Print.
3. Enter the required date range > OK.
4. Complete the Printer window as required then to print the report > OK.

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

When you've produced both reports, you should deduct the total value of the Daily Gross Takings 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 Expected Selling Price of Goods Received - periods 1 to 3

For the first three periods that you use the Apportionment Retail scheme 2, you must account for the value of your opening stock when you calculate your output tax.

These reports are only available in the Sage 50 Accounts - Additional Reports Backup, you can download and restore this from the Updates page on support.sage.co.uk. Read more >

1. VAT > Reports.
2. VAT Scheme Reports > select the ESP Retail scheme - Zero Rated Goods report > Print.
3. Enter the date range required > OK. For the first period you're on this scheme, the period used to calculate the reports is the VAT period, plus the previous three months.
   

   NOTE: For the second period you're on this scheme, the period for the reports should include the entire time you've been on the scheme, plus the three months before you started using the scheme.
   For the third period you're on this scheme, the period for the reports should include the entire time you've been on the scheme, plus the three months before you started using the scheme.
   If you've already established the ESPs of your Opening Stock for Retail, then please exclude the three month period before starting the scheme from the report periods.

4. Complete the Printer window as required then to print the report, click OK.

   Repeat this process for the until you've printed the following reports:

   Report	File name
   Retail Scheme - ESP Lower Rated Credits	AT_ESPLC.report
   Retail Scheme - ESP Lower Rated Goods	AT_ESPLI.report
   Retail Scheme - ESP Standard Rated Credits	AT_ESPSC.report
   Retail Scheme - ESP Standard Rated Goods	AT_ESPSI.report
   Retail Scheme - ESP Zero Rated Credits	AT_ESPZC.report
   Retail Scheme - ESP Zero Rated Goods	AT_ESPZI.report

5. Subtract the value of the Credits report from the total of the relevant Goods report.
   
   For example, to establish the ESP for Lower Rated Goods, you must subtract the value of the Retail Scheme - ESP Lower Rated Credits report from the total of the Retail Scheme - ESP Lower Rated Goods report.

You've now established the Expected Selling Prices of the Goods Received, these figures are now used in the VAT calculation. For further information about the VAT Calculation, please refer to VAT Notice 727/4 Retail Schemes: How to work the Apportionment Schemes. If you require further information about the VAT calculation, please refer to your local VAT office. When you've established the Output VAT value, please proceed to the section To correct the balance on the Sales VAT Control Account later in this article.

Calculate the Expected Selling Price of Goods Received - periods 4 onwards

From period 4 onwards, you no longer need to account for the value of your opening stock when you calculate your output tax.

These reports are only available in the Sage 50 Accounts - Additional Reports Backup, you can download and restore this from the Updates page on support.sage.co.uk. Read more >

1. Transactions > Reports.
2. VAT Scheme Reports > select the ESP Retail scheme - Zero Rated Goods report > Print.
3. Enter the date range required > OK.
   

   NOTE: From period four onwards, the VAT period is the current period plus the previous three tax periods.

4. Complete the Printer window as required then to print the report, click OK.

   Repeat this process for the until you've printed the following reports:

   Report	File name
   Retail Scheme - ESP Lower Rated Credits	AT_ESPLC.report
   Retail Scheme - ESP Lower Rated Goods	AT_ESPLI.report
   Retail Scheme - ESP Standard Rated Credits	AT_ESPSC.report
   Retail Scheme - ESP Standard Rated Goods	AT_ESPSI.report
   Retail Scheme - ESP Zero Rated Credits	AT_ESPZC.report
   Retail Scheme - ESP Zero Rated Goods	AT_ESPZI.report

5. Subtract the value of the credits report from the total of the relevant goods report.
   
   For example, to establish the ESP for Lower Rated Goods, you must subtract the value of the Retail Scheme - ESP Lower Rated Credits report from the total of the Retail Scheme - ESP Lower Rated Goods report.

You've now established the Expected Selling Prices of the Goods Received, these figures are now used in the VAT calculation. For further information about the VAT calculation, please refer to VAT Notice 727/4 Retail Schemes: How to work the Apportionment Schemes. If you require further information about the VAT calculation, please refer to your local VAT office. When you've established the output VAT value, please proceed to the following section.

Correct the balance on your Sales Tax Control Account

Once you've used the calculations as specified in VAT Notices 727/4, you need to correct the balance on your Sales VAT Control Account. This balance is incorrect because you've recorded all of your sales at the standard rate and then applied the Apportionment calculation to your sales.

NOTE: In this example the balance on the Sales Tax Control Account is £225. This is made up of standard rate VAT applied to £1000 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 details, 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 VAT Control Account.

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 Tax Account to the Apportionment Sales VAT nominal code.

You've now accounted for VAT under the Apportionment Retail Scheme - scheme 2 in Sage 50 Accounts.