UK standard VAT scheme

Summary

How the VAT Return calculates and how to check the VAT Return in Sage 50 Accounts for Standard VAT in the UK.

Description

Many businesses using Sage Accounts are VAT registered which means that each month or quarter, they must produce and reconcile their VAT Return. Read more >

For further information about VAT, refer to the HM Revenue & Customs (HMRC) website at www.hmrc.gov.uk

Resolution

The VAT Return

If you haven't already started your VAT Return, you can find everything you need to know in our Help Centre.

How the VAT Return calculates

Sage 50 Accounts calculates the VAT Return based on your VAT scheme. When using the Standard VAT Scheme your return is calculated based on the following VAT elements:

Sales invoices (SI), purchase invoices (PI) and sales credits (SC) and purchase credits (PC).
Bank receipts (BP), cash receipts (CR), visa receipts (VR) and bank payments (BP), cash payments (CP) and cash receipts (CR).
Journal entries (JC/JD) posted to the Sales Tax Control Account, Purchase Tax Control Account or non tax control accounts using a vatable tax code.

The following table explains how each box calculates on the VAT Return:

Box	Details	Tax codes included	Transactions included
1	VAT on your sales.	T1, T5, T15, T17, T18, T20, T21, T24, T26	SI, SC, BR, CR, VR, JC
2	VAT on any EC acquisitions of goods made in Northern Ireland from EU Member States.	T8	PI, PC, BP, CP, VP, JD
3	Total VAT due, therefore the total of boxes 1 and 2.	N/A	N/A
4	Total VAT on your purchases including acquisitions in Northern Ireland from EU member states.	T1, T5, T8, T15, T17, T18, T20, T21, T24, T25, T26	PI, PC, BP, CP, VP, JD
5	Net amount of VAT to be paid to HMRC or reclaimed by you.	N/A	N/A
6	Value of your sales excluding VAT.	T0, T1, T2, T4, T5, T15, T20, T21, T22, T23, T24, T26	SI, SC, BR, CR, VR, JC
7	Value of your purchases excluding VAT.	T0, T1, T2, T5, T7, T8, T14, T15, T16, T17, T18, T19, T20, T21, T23, T24, T25, T26	PI, PC, BP, CP, VP, JD
8	Value of your EC sales excluding VAT from Northern Ireland to EU member States.	T4	SI, SC, BR, CR, VR, JC
9	Value of your EC purchases excluding VAT made in Northern Ireland to EU member States.	T7, T8	PI, PC, BP, CP, VP, JD

TIP: Need more help on transaction types, view our guide.

Confirm the figures on the VAT Return

Once you have calculated your VAT Return, you can click the value you would like to see a breakdown of. If you'd like to see the included transaction then double-click the value.

You can then use the reports to confirm the figures in each of the boxes on the VAT Return.

Click the relevant 'box' below to see which reports you need to run to confirm the values are correct.

NOTE: All of the reports are in Reconciliation reports > Reconciliation reports > Standard VAT.

Box 1

The figure in Box 1 should agree with the Nominal Activity History Balance on your Sales Tax Control Account when calculated for the same period. It should also agree with:

	The VAT element of the transactions on the Day Books: Customer Invoices (Detailed) report.
Less	The VAT element of the transactions on the Day Books: Customer Credits (Detailed) report.
Plus	The VAT element of the transactions on the Day Books: Bank Receipts (Detailed) report. You must add the VAT total on each bank account together to get the full VAT element.
Plus	The VAT element of the transactions on the Day Books: Cash Receipts (Detailed) report. You must add the VAT total on each bank account together to get the full VAT element.
Plus	The VAT element of the transactions on the Day Books: Credit Card Receipts (Detailed) report. You must add the VAT total on each bank account together to get the full VAT element.
Plus	The value of any journal credits posted to the Sales or Purchase Tax Control Accounts with a vatable tax code. The credit value of any VATable journals on the Day Books: Nominal Ledger report.
Plus	The value of T20 reverse charge transactions and T24 transactions when they're linked to T1. The T20 and T24 transaction on the Tax Analysis (By Invoices & Credits) report.

Why the figures don't agree

Manual adjustments may have been made, to view or amend manual adjustments, from the VAT Return window click the Adjustments button.
The figures from previous VAT Returns haven't been cleared from the Sales Tax Control Account.
Journals have been entered directly to the Sales Tax Control Account with a tax code that isn't included in the VAT Return, for example, T9.
Journal reversals have been posted.
Different date ranges have been specified when calculating the VAT Return and the balance on the Sales Tax Control Account.
An opening balance has been entered onto the Sales Tax Control Account.
A VAT element has been entered onto a sales transaction where the tax code used isn't included in the VAT Return.
Unreconciled transactions from before the specified VAT period have been included in the VAT Return, but they're not included in the day books reports.
You've posted transactions with a vatable tax code but the transaction types aren't included in the VAT Return, such as sales discounts.
The report may include T9 transactions that aren't included on the VAT Return.

Box 2

The figure in Box 2 is the notional VAT calculated on T8 transactions when T8 is linked to T1. This figure should be 20 % of the value of your T8 transactions.

NOTE: If you want a report to show these transactions with the notional VAT calculated, please contact us.

Box 3

This is the sum of Box 1 plus Box 2.

Box 4

The figure in Box 4 should agree with the Nominal Activity History Balance on your Purchase Tax Control Account when calculated for the same period. It should also agree with:

	The VAT element of the transactions on the Day Books: Supplier Invoices (Detailed) report.
Less	The VAT element of the transactions on the Day Books: Supplier Credits (Detailed) report.
Plus	The VAT element of the transactions on the Day Books: Bank Payments (Detailed) report. You must add the VAT total on each bank account together to get the full VAT element.
Plus	The VAT element of the transactions on the Day Books: Cash Payments (Detailed) report. You must add the VAT total on each bank account together to get the full VAT element.
Plus	The VAT element of the transactions on the Day Books: Credit Card Payments (Detailed) report. You must add the VAT total on each bank account together to get the full VAT element.
Plus	The value of any journal debits posted to the Sales or Purchase Tax Control Accounts with a vatable tax code.
Plus	The value of T20 reverse charge transactions and T24 transactions when they're linked to T1.

Why the figures don't agree

Manual adjustments may have been made, to view or amend manual adjustments, from the VAT Return window click the Adjustments button.
The figures from previous VAT Returns haven't been cleared from the Purchase Tax Control Account.
Journals have been entered directly to the Purchase Tax Control Account with a tax code that isn't included in the VAT Return, for example, T9.
Different date ranges have been specified when calculating the VAT Return and the balance on the Purchase Tax Control Account.
An opening balance has been entered onto the Purchase Tax Control Account.
Notional VAT has been manually added to T8 transactions and included in Box 4.
A VAT element has been entered onto a purchase transaction where the tax code used isn't included in the VAT Return.
Unreconciled transactions from before the specified VAT period have been included in the VAT Return, but they're not included in the day books reports.
You've posted transactions with a vatable tax code but the transaction types aren't included in the VAT Return, such as purchase discounts.

Box 5

This is the figure in Box 3 less the figure in Box 4.

Box 6

The figure in Box 6 is the total net value of sales and should agree with:

	The net element of the transactions on the Day Books: Customer Invoices (Detailed) report.
Less	The net element of the transactions on the Day Books: Customer Credits (Detailed) report.
Less	The net element of the transactions for goods on the VAT > OSS IOSS transactions > Non-union OSS Transactions (Detailed) report. You must add the Net total for each tax code used for goods to get the full Net element. NOTE: If this value is negative, you should add it instead.
Less	The net element of the transactions for services on the VAT > OSS IOSS transactions > IOSS Transactions (Detailed) report. You must add the Net total for each tax code used for services to get the full Net element. NOTE: If this value is negative, you should add it instead.
Plus	The net element of the transactions on the Day Books: Bank Receipts (Detailed) report. You must add the Net total on each bank account together to get the full Net element.
Plus	The net element of the transactions on the Day Books: Cash Receipts (Detailed) report. You must add the Net total on each bank account together to get the full Net element.
Plus	The net element of the transactions on the Day Books: Credit Card Receipts (Detailed) report. You must add the Net total on each bank account together to get the full Net element.
Plus	The value of any journal credits posted to nominal codes other than the Sales or Purchase Tax Control Accounts, with a vatable tax code.

Why the figures don't agree

Manual adjustments may have been made, to view or amend manual adjustments, from the VAT Return window click the Adjustments button.
Transactions on the reports have tax codes that aren't included on the VAT Return.
Inconsistent date ranges have been used.
Unreconciled transactions from before the specified VAT period have been included in the VAT Return, but they're not included in the day books reports.

Box 7

The figure in Box 7 is the total net value of purchases and should agree with:

	The net element of the transactions on the Day Books: Supplier Invoices (Detailed) report
Less	The net element of the transactions on the Day Books: Supplier Credits (Detailed) report
Plus	The net element of the transactions on the Day Books: Bank Payments (Detailed) report You must add the Net total on each bank account together to get the full Net element.
Plus	The net element of the transactions on the Day Books: Cash Payments (Detailed) report You must add the Net total on each bank account together to get the full Net element.
Plus	The net element of the transactions on the Day Books: Credit Card Payments (Detailed) report You must add the Net total on each bank account together to get the full Net element.
Plus	The value of any journal debits posted to nominal codes, other than the Sales or Purchase Tax Control Accounts, with a vatable tax code

Why the figures don't agree

Manual adjustments may have been made, to view or amend manual adjustments, from the VAT Return window click the Adjustments button.
Transactions on the reports have tax codes that aren't included on the VAT Return. You can check for T9 transactions using the T9 Transaction Listing Report - Transactions > Reports > Transactions > T9 Transaction listing.
Inconsistent date ranges have been used.
Unreconciled transactions from before the specified VAT period have been included in the VAT Return, but they're not included in the day books reports.

Box 8

The figure in Box 8 should be the same as the total debit figure, minus the total credit figure on the Customer EC Sales Activity report. To run this report, open the Customers module, click Reports then click EC Sales Reports.

The total debit figure, minus the total credit figure on the Customer EC Sales Activity report.

TIP: To run this report, open the Customers module, click Reports then click EC Sales Reports.

Plus

The net element of the transactions for goods on the VAT > OSS IOSS transactions > Union OSS Transactions (Detailed) report.

You must add the Net total for each tax code used for goods to get the full Net element.

NOTE: If this value was negative, you should subtract it instead.

Box 9

The figure in Box 9 is the Purchase Invoices (T7 or T8 transactions only) minus the Purchase Credits (T7 or T8 transactions only) as long as no custom tax codes for EC purchases or edited the default tax codes have been used.

NOTE: If you want a report to display these transactions, please contact us.

Common Queries

See what you've been asking us. Read more >

How do I view the reconciliation status of a transaction?

Locate the transaction in Transactions then check the VAT column as follows:

R	This indicates that the transaction is reconciled.
N	This indicates that the transaction hasn't yet been reconciled.
-	This indicates that it is a non-vatable transaction, for example, a sales receipt, posted using the default non-vatable tax code T9.

What's the difference between zero rated and exempt items?

Zero rated items are goods on which the Government charge VAT but the rate is currently set to zero. The goods covered by this classification are items such as children's clothes and footwear, water, basic foods, books and newspapers.

Exempt items are goods on which no VAT is paid or charged, but which still need to be recorded on the VAT Return. The goods covered by this classification are items such as land, postal services, health services, betting and gaming.

I forgot to reconcile my last VAT Return. What should I do?

If you didn't reconcile the transactions on your previous VAT Return, the next time that you calculate your VAT Return a message appears informing you that Sage Accounts has found a number of unreconciled transactions from before the specified period.

If these transactions relate to a previously unreconciled VAT Return

Calculate the VAT Return from the previous period, then check it against the VAT Return that you submitted to HMRC.
If the figures are the same > reconcile the transactions > proceed with your current VAT Return.
If the figures are different, this may be due to the following:
- Transactions from the previous period that you haven't chosen to include in the calculation. For example, if your current period is quarter 4, and you forgot to reconcile quarter 3. These transactions may be late entries from quarter 2. In this case, you can recalculate the VAT Return including these figures. If the totals then match, you can reconcile the transactions.
- Transactions from the current period that were posted after you completed the VAT Return, but are dated in the previous period. For example, if your current period is quarter 4, and you forgot to reconcile quarter 3, these transactions may have been posted after you completed the quarter 3 VAT Return using a quarter 3 date.
  If you don't know which transactions are causing the differences, you must calculate the VAT Return for both VAT periods then deduct the figures from the previous VAT period. The resulting figures are the values for the current VAT period.

Why is the figure in Box 1 or Box 4 isn't 20% of the figure in Box 6 or Box 7?

The figure in Box 1 or Box 4 isn't 20% of the figure in Box 6 or Box 7 when transactions are included in Box 6 or Box 7 that don't have VAT at 20%, for example:

You've posted transactions using a lower rated tax code, such as T5 at 5%.
You've posted transactions with a tax code that's a 0% VAT rate but is included in the VAT Return, such as T0 and T2.
You've posted import transactions using the T14 tax code. These transactions are included in Box 7, but don't have VAT recorded in Box 4.
You've posted journals that are included in Box 1 or Box 4 and Box 6 or Box 7, but the journal in Box 1 or Box 4 isn't 20% of the journal in Box 6 or Box 7.
You've posted a manual adjustment to Box 1 Box 4, Box 6 or Box 7.

How do I view the earlier unreconciled transactions?

When you click Calculate VAT Return, a list of the earlier unreconciled transactions appears. To print this list > Print. You can also print the list of these transactions from the Reconcile VAT Return window, click Print VAT Return and select Earlier unreconciled transactions.

Why do T9 transactions appear on the VAT Report (detailed) report?

If your T9 transactions appear on your VAT Report (detailed) report, the tax code T9 has been flagged to be included on the VAT Return. You can amend this in the tax code configuration.

Settings > Configuration > Yes to close all other open windows > Tax Codes.
From the list of tax codes, select tax code T9 > Edit.
Clear the Include in VAT return check box > OK.
Apply > Close and if prompted to save your changes > No.

I've reconciled a VAT Return in error. Can I undo this?

No, it isn't possible to undo a VAT reconciliation. To correct this you need to restore a backup taken before the VAT Return was reconciled.

How do I change the non-vatable tax code?

Settings > Company Preferences > Yes to close all other open windows > VAT.
From the Non-Vatable Tax Code drop-down list select the required tax code > OK.

How do I know what VAT period to use?

When you register for VAT HMRC advise you of the VAT periods you'll submit for. If you submit quarterly your VAT period falls into one of the following staggers:

March - June - September - December
April - July - October - January
May - August - November - February

If necessary, you can apply to have your VAT period end pattern changed to a different pattern, or request to submit monthly or annual VAT Returns.

I'm not yet ready to run the year end. Can I still reconcile my VAT Return?

Yes, you can reconcile your VAT Return before running the Year End option. Reconciling your VAT Return within Sage Accounts doesn't remove any transactions, therefore all balances are still correct.

How does OSS/IOSS affect my VAT Return?

How your VAT Return is affected depends on the reporting type and whether the transaction includes goods or services. Read more >

Solution Properties

Solution ID: 200427112313225
Last Modified Date: Mon Mar 09 10:07:07 UTC 2026
Attributes: Product Details
Modules: Tax
Modules: VAT
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