Summary
Description
Tax codes identify how much VAT to pay on different goods and services.
If you're VAT registered, the tax code for each transaction in Sage 50 Accounts determines the VAT Return box affected.
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 Tax Codes.
- Select the Code then click Edit.
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.
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
▼ 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
▼ 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
▼ 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
▼ 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
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 offers general guidance only. While accurate at the time of publication, it may not suit your specific needs. We make no express or implied warranties. For tailored advice, consult a professional. For VAT, customs, or duties queries, contact HMRC on 0300 200 3700 or visit www.hmrc.gov.uk. We accept no liability for any loss from using this content. VAT or tax codes shown reflect default software settings and may differ in your setup. |
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