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Which tax code should I use? - from 1 January 2021 (UK only)

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Summary

This guide explains what tax code to use for sales of an asset when using the Flat Rate VAT schemes.

Description

Based on the information you've given us, we recommend you use one of the following tax codes:

VAT was originally recovered when purchased

Under the Flat Rate Scheme, the purchase of capital assets costing more than £2,000 including VAT, where VAT is recovered, should be recorded with a T25 tax code. When such assets are then sold, full VAT should be declared and therefore the T25 tax code should be used on the sale as well.

Which tax code to use T25
How this affects your VAT Return

Flat rate schemes:

The tax amount appears in box 1.
The net amount appears in box 6.

Standard and VCA schemes:

You should not use this tax code on Standard or VCA VAT schemes.

VAT was not originally recovered when purchased

If VAT wasn't recovered on the purchase then the normal tax codes apply, for example T1 for a standard rated purchase and sale.

Standard rated - 20%

Which tax code to use T1
How this affects your VAT Return

Flat rate schemes:

The flat rate percentage of the gross amount appears in box 1.
The gross amount appears in box 6.

Reduced rate -  5%

Which tax code to use T5
How this affects your VAT Return

Flat rate schemes:

The flat rate percentage of the gross amount appears in box 1.
The gross amount appears in box 6.

Zero rated

Which tax code to use T0
How this affects your VAT Return

Flat rate schemes:

The flat rate percentage of the gross amount appears in box 1.
The gross amount appears in box 6.

Exempt

Which tax code to use T2
How this affects your VAT Return

Flat rate schemes:

The flat rate percentage of the gross amount appears in box 1.
The gross amount appears in box 6.

TIP: Unsure which rate to apply? Read more >

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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.