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UK - Default tax codes

Created on 08 May 2020 | Last modified on 19 November 2024

Summary

The default tax codes used in Sage 50 Accounts v27.1 and above.

Description

Tax codes identify how much VAT to pay on different goods and services.

Find the right tax code to use

We have some articles to help you find the correct tax code to use:

Identify Which tax code should I use?
View examples of Tax codes to use for popular goods and services

Default tax codes in your software

To check the default tax codes in your software:

Click Settings then click Configuration then click the Tax Codes

A list of the default tax codes appear.

TIP: If the tax code isn't in this guide, you can create or amend a tax code.

▼ T0 - Zero rated transactions

Some goods and services are taxable for VAT but the vat rate is 0.00%. This rate may only apply in specific situations or it may depend on who the customer is. Some examples include:

Children's clothes and footwear
Water
Basic foods
Books and newspapers

On the VAT Return

Sale - Net amount affects box 6. VAT amount N/A.
Purchase - Net amount affects box 7. VAT amount N/A.

Configuration

▼ T1 - Standard rated transactions - Currently 20%

If you're VAT registered, you must charge VAT at the standard rate on goods and services unless they fall under a different category. Before selecting any rate other than standard, check HMRC's website to determine which rate applies to specific circumstances.

On the VAT Return

Sale - Net amount affects box 6. VAT amount affects box 1.
Purchase - Net amount affects box 7 VAT amount affects box 4.

Configuration

View examples >

▼ T2 - Exempt transactions

Some goods and services are exempt from VAT. For example:

Insurance, finance and credit
Education and training
Fundraising events by charities
Subscriptions to membership organisations

On the VAT Return

Sale - Net amount affects box 6. VAT amount N/A
Purchase - Net amount affects box 7. VAT amount N/A

Configuration

View examples >

▼ T4 - Sale of goods to VAT registered customers in EC

On the VAT Return

Sales - Net amount affects boxes 6 and 8. VAT amount N/A.

Configuration

▼ T5 - Lower Rate - Currently 5%

This reduced rate of VAT applies to certain goods and services including:

Children's car seats
Home energy
Insulation

On the VAT Return

Sales - Net amount affects box 6. VAT amount affects box 1
Purchases - Net amount affects box 7. VAT amount affects box 4

Configuration

View examples >

▼ T7 - Zero rated purchases of goods from suppliers in EC

On the VAT Return

Purchases - Net amount affects boxes 7 and 9. VAT amount N/A.

Configuration

▼ T8 - Standard rated purchases of goods from suppliers in EC

On the VAT Return

Purchases - Net amount affects boxes 7 and 9. VAT amount affects boxes 2 and 4. This is notional VAT which cancels itself out.

Configuration

▼ T9 - Transactions not including VAT

On the VAT Return

Non-vatable code that doesn't appear

Configuration

View examples >

The system excludes these tax codes by default, so they don't appear in your VAT Return.

▼ T14 - Import of goods - No VAT

NOTE: Introduced in Sage 50 Account sv27.2

On the VAT Return

Purchases - Net amount affects box 7.

Configuration

▼ T15 - Purchase of services from ROW - Reverse charge

On the VAT Return

Purchases - Net amount affects box 6 and 7. VAT amount affects boxes 1 and 4. This is notional VAT which cancels itself out.

Configuration

▼ T16 - Purchase of services from ROW - No VAT

On the VAT Return

Purchases - Net amount affects box 7.

Configuration

▼ T17 - Import of goods - Under import reverse charge threshold

On the VAT Return

Purchases - Net amount affects box 7. VAT amount affects boxes 1 and 4. This is notional VAT which cancels itself out.

Configuration

▼ T18 - Import of goods - Postponed VAT

On the VAT Return

Purchases - Net amount affects box 7. VAT amount affects boxes 1 and 4. This is notional VAT which cancels itself out.

To ensure your VAT Return is correct when you post a Postponed VAT transaction, the system makes Automatic postings of postponed accounting.

Configuration

For more information, read our What is postponed accounting? guide.

▼ T19 - Import of goods - VAT not postponed

On the VAT Return

Purchases - Net amount affects box 7. VAT amount affects box 4.

Configuration

▼ T20 - Domestic reverse charge

This refers to goods and services which fall under the VAT domestic reverse charge.

On the VAT Return

Sales - Net amount affects box 6. VAT amount N/A
Purchases - Net amount affects box 7. VAT amount affects boxes 1 and 4. This is notional VAT which cancels itself out

Configuration

▼ T21 - CIS reverse charge - Standard rate

This refers to the domestic reverse charge on supplies of building and construction services.

On the VAT Return

Sales - Net amount affects box 6. VAT amount N/A
Purchases - Net amount affects box 7. VAT amount affects boxes 1 and 4. This is notional VAT which cancels itself out

Configuration

▼ T22 - Sales of services to VAT registered customers in EC

On the VAT Return

Sales - Net amount affects box 6. VAT amount N/A.

Configuration

▼ T23 - Zero rated or exempt purchases of services from suppliers in the EC

On the VAT Return

Purchases - Net amount affects boxes 6 and 7. VAT N/A.

Configuration

▼ T24 - Standard rated purchases of services from suppliers in EC

On the VAT Return

Purchases - Net amount affects boxes 6 and 7. VAT amount affects boxes 1 and 4. This is notional VAT which cancels itself out.

Configuration

▼ T25 - UK Flat Rate scheme only - Flat Rate Capital Asset

On the VAT Return

Purchases - Net amount affects box 7. VAT amount affects box 4.

Configuration

▼ T26 - CIS reverse charge - Reduced rate

On the VAT Return

Sales - Net amount affects box 6. VAT amount N/A
Purchases - Net amount affects box 7. VAT amount affects boxes 1 and 4. This is notional VAT which cancels itself out

Configuration

This article provides general rather than specific guidance to assist all of our customers. We always do our best to make sure that the information is correct but as it's general guidance, no guarantees can be made concerning its suitability for your particular needs. The information is valid at the time of publishing and is provided without any warranty of any kind, express or implied. You should take professional advice if you require specific guidance on your individual circumstances, for example to ensure that the results obtained from using our software comply with statutory or regulatory requirements. For VAT, customs and excise and duties enquiries you should call the HM Revenue and Customs (HMRC) National Advice Service Helpline on 0300 200 3700, contact your local HMRC office or visit their website at www.hmrc.gov.uk In no event will we be liable to you for any direct, indirect, consequential or incidental loss or damage arising out of or in connection with your use of the information provided.
The VAT or tax codes used in this article are based on the default or recommended codes set up in the software. These may be different in your software.