Summary
Description
TIP: For a quick guide to tax codes for common scenarios for trading between the UK and EU, take a look at our quick guide.
When you enter transactions using tax code T18 (or your equivalent) we'll post the notional VAT amounts and a credit so you don't pay the supplier too much. On a monthly basis, you'll receive a statement from HMRC detailing all your VAT postponements, you'll compare this with the amounts on your postponed transactions on your vat return for that period and if the number is different you can then post an adjustment VAT only invoice to your postponed accounting tax code if your number is lower than HMRC's, or a VAT only credit note to your postponed accounting tax code if your total is higher than HMRC's. Read on to find out more and how to process these types of transactions.
Resolution
Using postponed accounting, any import VAT due on goods arriving in the UK can be accounted for on a VAT Return rather than having to pay the VAT as soon as the goods arrive in the UK. In Sage 50 Accounts v27.1 and above, the postponed accounting tax code is T18 by default. For information about how T18 is configured, read the T18 section on our guide on default tax codes and how they affect your VAT return.
If you use Sage 50 Accounts v27.0 or below, for help with postponed accounting postings please refer to our tax code guide.
Posting a supplier invoice with postponed VAT
When you use the T18 tax code, or equivalent, for a purchase invoice, it has the following effect:
- The postponed VAT amount adds to the invoice value.
- A VAT only credit note automatically posts to T18 for the postponed VAT value. This reduces the outstanding value.
- The credit note allocates to the invoice automatically.
- The VAT due for the purchase adds to boxes 1 and 4 of the VAT Return so its paid and reclaimed on the VAT Return.
- The credit note doesn't impact the VAT Return. It corrects the supplier balance.
- The net value of the purchase adds to VAT return box 7.
- If the invoice has multiple item lines with VAT values, a credit posts automatically for each line.
NOTE: By default, T18 is the postponed VAT code, but may differ depending on the tax codes you already have.
Posting a supplier credit with postponed VAT
When you use the T18 tax code, or equivalent, for a purchase credit, it has the following effect:
- A VAT only invoice automatically posts to T18 for the postponed VAT value.
- The invoice allocates to the credit automatically.
- The VAT value for the credit reduces the value of boxes 1 and 4 of the VAT Return.
- The VAT on the VAT only invoice doesn't impact the VAT Return. It corrects the supplier balance.
- The net value of the credit reduces the value of VAT Rturn box 7.
- If the credit has multiple item lines with VAT values, an invoice posts automatically for each line.
NOTE: NOTE: By default, T18 is the postponed VAT code, but may differ depending on the tax codes you already use.
TIP: If you make postponed accounting postings based on an estimated VAT amount, after confirming the VAT, you can post transactions to correct the VAT amount on your next VAT Return Read more >
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. |
Benefits for your employees
We want to help your business where we can. That's why we're offering Sage Employee Benefits for free to Sage customers for the first three months.