Disclaimer
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.
Using your check list you should amend the VAT Type of any products, services, customers and suppliers that have been set to use the temporary rate of 12.5% so that they pick up the standard rate of VAT as per the VAT Matrix.
Alternatively, you can change the newly created VAT code(s) so that they have a VAT rate of 20%. New VAT code(s) for the 5% rate should be created so that they can be used for any late invoices or credits.
The same considerations need to be taken as detailed for the change from 5% to 12.5%.
To help businesses in the hospitality, holiday accomodation and attractions sectors, the reduced rate of VAT (5%) will apply to:
If your business makes such supplies there are some simple changes you will need to make in your software to affect the tax rate applied on or after 15 July 2020.
You can see which items are impacted by the change here.
Specific government instructions around the VAT rate changes and what it means for day-to-day processing can be found here.
During the 2021 budget, a further six months were granted until 30th September 2021. A new rate of 12.5% is to be introduced on 1st October 2021 which will run until 31st March 2022.
It is surmised that new VAT code(s) will be set up for the new 12.5% VAT rate. Existing Sales and Purchase Orders and Invoices not posted will not be automatically updated with the new VAT code(s) and therefore will be invoiced at the rate determined by their current VAT code(s). These will need to be manually changed where the new VAT code / rate is applicable.
Any orders that require the new rate should not be added to the system until the changes to the VAT Matrix are complete.
There are likely to be occasions that the VAT code for a Product/Service will need to be changed so it is recommended that the system is set to allow this. To do this
In Sage ERP 1000 and Line 500 VAT is calculated by using a VAT matrix. The matrix will consist of a combination of Product/Services (Item VAT) and Customers (Account VAT), resulting in the appropriate VAT calculation (VAT code).
Only one code is required but separate codes are often created for Sales and Purchase VAT. You can do this as follows:
To calculate a Product/Service at the new rate of 5% a new Item VAT type needs to be required. This code can then be added to the Products/Services. You can do this as follows:
To add this to a Product
To add this to a Sales Service code
To add this to a Purchase Service code
If all Products/Services for a Customer or a Supplier need to be calculated at the new rate of 12.5% or you have decided to have more than one 5% VAT code then Account VAT Type(s) should be added as well. The code(s) can then be added to the Customer/Supplier. You can do this as follows:
To add this to a customer
To add this to a Supplier
The purpose of the VAT Matrix is to allow you to put together all the Item VAT Types and all the Account VAT Types into a matrix within which you can specify the resultant VAT Code that should be used for all the combinations. You will need to ensure that existing Account and Item VAT Types are also taken into consideration.
To add a combination for your new Item VAT Type
Repeat this for all the Item and Account Type combinations that require the new VAT rate.
Keep a list of any changes you make in the product as they will need to be changed at the end of the period (6 months)
Any credit notes created for invoices posted before the changes will need to be manually checked to ensure that the correct VAT rate is picked up.
Any quotes that are converted into Sales Orders will use the rate of VAT that was on the quote at the time of creation. This can be amended manually on the detail lines of the quote before it is converted or on the sales order lines when converted.
Any standard orders that are converted into Sales Orders will use the rate of VAT that was on the standard order at the time of creation. This can be amended manually on the lines of the standard order or on the sales order lines when converted.
Any scheduled orders that are converted into Sales Orders will use the rate of VAT that was on the schedule at the time of creation. This can be amended manually on the lines of the scheduled order or on the sales order lines when converted.
If OPORDDISC is YES, you need to consider the system key OPSPLITVAT if your orders will have lines of multiple VAT rates.
This functionality has been modified so we advise that you check the binaries relevant to the Line 500/Sage 1000 version/platform before applying the changes. Specifically, OP, PO, SL, PL and CE. If any of these binaries have a date of 2014 or older then we strongly advise these to be updated to the latest binaries.
In Contract Management there are no facilities to make manual changes to VAT codes so you must enter new orders to pick up the new VAT rate.
If reverse charge VAT is in use then please note:
For items like accommodation a new specific VAT item type will need to be created for use with the VAT matrix with an account VAT type suppliers, to point to a new zero rated VAT code, and that VAT code would have a new mapped VAT code of 12.5%. These new codes would only use that in the relevant period. Please see the MTD manual for more information on Reverse Charge VAT.
As part of this process if you identify an invoice where information has been recorded incorrectly, it’s advisable to correct the order rather than amend values on the VAT return.