Changing VAT schemes in Sage 50 Accounts - Ireland only

Standard VAT to VAT Cash Accounting

On the Standard VAT scheme, you pay and reclaim VAT on invoices and credits. However, when you change to VAT Cash Accounting, VAT calculates on monies received or paid.

You should carry out the following procedure after reconciling your VAT Return on the Standard VAT scheme and before entering any transactions under the VAT Cash Accounting scheme.

Before you start

Before changing your VAT scheme, you should take a backup of your data and reconcile your VAT Return up to the end of your Standard VAT scheme period.

1. Click VAT then click VAT Return.
2. Calculate and reconcile the VAT Return for your final Standard VAT scheme period.

You're now ready to change from the Standard VAT scheme to the VAT Cash Accounting scheme.

Change your VAT scheme

NOTE: You must ensure you've reconciled your VAT Return before changing your VAT scheme. Please do not continue unless you have completed the previous section.

1. Click Settings then click Company Preferences and click VAT.
2. Click the VAT Scheme drop-down and choose VAT Cash Accounting (Ireland).
   
   The following message appears: 'Changing to the Standard VAT Scheme may affect Payments on Account within Recurring Entries. You must ensure these recurring entries are set up correctly before processing.'
   
   
3. Click OK then click OK.

You've now changed to the VAT Cash Accounting scheme. 

Create and amend the tax codes

You must now change the tax codes to make sure that all VAT reconciled under the Standard VAT scheme isn't reconciled a second time under the VAT Cash Accounting scheme.

1. Click Settings then click  Configuration and click Tax Codes.
2. From the list of tax codes, select the tax code you want to amend then click Edit.
3. Complete the Edit Tax Code window as required. Read more >
4. To save any changes made to the tax code click OK.
5. Repeat steps 2 to 4 for each tax code you want to amend.
6. Click OK.

You've now created and amended the tax codes.

Prepare your data before processing on the VAT Cash Accounting scheme

Before you enter any transactions under the VAT Cash Accounting scheme, you must prepare your data as follows:

TIP: To save you time, you can update multiple records at the same time using the Batch Changes option. Read more >

• Amend the Default Tax Code box on your customer, supplier and product records and delivery addresses to the relevant new tax code. For example, if your customer's default tax code was T1, under the new VAT scheme you should amend this to the new code you've created for T1 in the range of T51 and above.
• Amend the tax code on unposted invoices to the relevant new tax code. For example, if the tax code on the invoice item line was T2, under the new VAT scheme you should amend this to the new code you've created for T2 in the range of T51 and above.
• Reverse or delete any outstanding payments on account with T9 tax codes, and re-post them with the relevant tax codes to match the invoices they are to be allocated to.
• Amend the default tax code for the Cash Register in Settings > Bank Defaults > Cash Register Settings > amend this to the new code you've created in the range of T51 and above.
• Sage 50 Accounts Professional only - Amend the tax code on all incomplete sales orders and purchase orders to the relevant new tax code. For example, if the tax code on the product item line was T0, under the new VAT scheme you should amend this to the new code you've created for T0 in the range of T51 and above.
• Amend the tax code on all of your memorised batch data entry files and any skeleton journals that you have saved. For example, if the tax code was T1, under the new VAT scheme you should amend this to the new code you've created for T1 in the range of T51 and above.
• Amend the Tax Code boxes in the Customer Defaults, Supplier Defaults and Product Defaults windows. For example, if the tax code was T1, under the new VAT scheme you should the new code you've created for T1 in the range of T51 and above. To amend the default tax codes > Settings > choose either Customer Defaults, Supplier Defaults or Product Defaults > amend the tax codes as required.
• Amend the tax codes on special item lines. Settings > Invoice and Order Defaults > Options > Special Items.

You've now prepared your data, and are ready to use the VAT Cash Accounting scheme.

For further information about reconciling your VAT Return using this scheme, please refer to our guide.

VAT Cash Accounting to Standard VAT

On the VAT Cash Accounting scheme, you pay and reclaim VAT on the monies you receive or pay. However, on the Standard Vat scheme, VAT calculates on the invoices and credits received or issued.

You should carry out the following procedure after reconciling the VAT on the VAT Cash Accounting scheme and before entering any transactions under the Standard VAT scheme.

NOTE: If you have any future dated invoices and credits, you should delete these before you switch VAT schemes and re-enter them after you complete the switch. This ensures that the VAT on these transactions calculates correctly.

Before you start

Before changing your VAT scheme, you should take a backup of your data and reconcile your VAT Return up to the end of your Standard VAT scheme period.

1. Click VAT then click VAT Return.
   
2. Calculate and reconcile the VAT Return for your final VAT Cash Accounting scheme period.

You're now ready to change from the VAT Cash Accounting scheme to the Standard VAT scheme.

Change your VAT scheme

TIP: In certain circumstances it may be possible to defer the payment of VAT after switching schemes. For more information, please refer to the Revenue or your accountant.

1. Click Settings then click Company Preferences and click VAT.
2. Click the VAT Scheme drop-down and choose Standard VAT.
   
   The following message appears: 'Changing to the Standard VAT Scheme may affect Payments on Account within Recurring Entries. You must ensure these recurring entries are set up correctly before processing.'
   
   
3. Click OK then click OK.

You've now changed your Sage Accounts to the Standard VAT scheme.

NOTE: There may be balances on your Sales Tax Control Account and Purchase Tax Control Account after posting your VAT transfer journals. You should clear these balances when you account for the outstanding invoices on your next VAT Return. For further information about this, please refer to the following section.

Run reports to identify outstanding invoices and duplicate values

You now need to account for any outstanding invoices and avoid including values twice on future VAT Returns

If you've any outstanding invoices at the point of switching VAT schemes, you should include these invoices on your next VAT Return.

Payments on account reconciled under the VAT Cash Accounting scheme may be subsequently allocated to an invoice under the Standard VAT scheme. If this occurs the VAT is calculated twice, once on the payment on account on VAT Cash Accounting and once on the invoice on Standard VAT.

To avoid the above situations, we've created four reports that show you any outstanding invoices and the net and VAT split, and list the outstanding payments on account. To download the reports, click Sage Accounts v21 and above - Additional Reports Backup then download and restore the backup. For further information, please refer to this guide >

NOTE: You must run these reports at the point of switching VAT schemes before you enter any transactions on the new scheme. You should then keep a copy of the reports. Once you start entering transactions on the Standard VAT scheme, you can't use these reports as any new transactions entered in the same date range are also included.

Correct any future VAT Returns if the reports produce any values

If you have any outstanding invoices which you entered on the VAT Cash Accounting scheme, you should adjust the values in boxes 1 and 6 to include the values from the reports in the previous section. If an invoice is allocated to a payment on account that you entered on the VAT Cash Accounting scheme, you should adjust the values in boxes 1 and 6 to include the invoice value that is allocated to the payment on account.

1. Click VAT then click VAT Return.
2. Enter the relevant dates then click Calculate VAT Return.
3. Click Make adjustments and enter the following adjustments in the relevant VAT Return box:

   Box number	Adjustment
   1	Add the total VAT value from the SL_VCA.report minus the total VAT value of any invoices allocated to the payments on account shown on the SA_VCA.report.
   6	Add the total Net value from the SL_VCA.report minus the total Net value of any invoices allocated to the payments on account shown on the SA_VCA.report.

4. Reconcile the VAT Return as normal.

You must now post a journal to move values entered above from the VAT adjustments nominal code to the VAT liability nominal code.

NOTE: When you run the VAT transfer, you must include the adjustment values.

1. Click Nominal codes then click Journal entry.
2. Post the relevant journal values.

If the value on the VAT adjustments nominal code is a credit balance, post the following journal values:

If the value on the VAT adjustments nominal code is a debit balance, post the following journal values:

Why the VAT reconciliation reports may not agree with the Tax Control Accounts

There may be differences between the VAT reconciliation reports and the balance on the VAT control accounts for the following reasons:

• If you use the Write Off, Refunds and Returns Wizard, the VAT isn't removed from the relevant VAT control account, but the invoices are marked as fully paid. Therefore the VAT is included on the VAT control account, but the invoices don't appear on the VAT reconciliation reports.
• If you've posted any sales or purchase transactions with a T9 tax code, but you've entered a value into the VAT amount.
• If you've not correctly posted your VAT journals to clear the VAT liability for previous VAT periods.