Set up VAT

Summary

How to set up VAT in Sage Accounting.

Description

Before you enter any transactions, and to make sure your VAT calculates correctly on the VAT return, you must make sure your VAT is set up correctly.

This explains how to:

Enter your VAT scheme and VAT registration number
Choose how often you submit VAT returns
Authorise Sage Accounting to send VAT returns to HMRC
Set up defaults to reduce errors
Set up VAT for trading abroad

Resolution

Skip too:

Enter your VAT scheme and registration number
Authorise for Making Tax Digital (MTD)
Set up VAT Details in Sage Accounting
Set up VAT for trading abroad

Enter your VAT scheme and registration number

From Settings, select Business Settings, then Accounting Dates & VAT.
In the VAT Details section, check or enter the following:
- VAT scheme - Check you have selected the correct scheme. For Flat rate schemes, enter the Flat rate % supplied by HMRC
- Submission frequency - Choose how often you submit a VAT Return to HMRC. This depends on how you registered with HMRC
- VAT number - Your VAT registration number
- HMRC user ID - optional. You can store this here for your records

Authorise for Making Tax Digital (MTD)

To submit VAT returns to HMRC, you must authorise Sage Accounting. You will need to re-authorise every 18 months.

Before you start

Make sure the VAT scheme and VAT registration number are correct
Make sure existing VAT returns are up to date and shown as submitted
Delete any draft VAT returns

Authenticate with HMRC

To submit VAT returns for Making Tax Digital you must authorise Sage Accounting to submit your VAT returns.

You will need your Government Gateway credentials to sign in to the Gateway as part of this process

From Settings, select Business Settings, then Accounting Dates & VAT.
From the Making Tax Digital section, select Authenticate.
Select I am signed up with HMRC for Making Tax Digital, then select Authenticate. This takes you to the Gov.uk website.
Select Continue when prompted, and sign in with your Government Gateway credentials. If you’re a VAT agent, enter your agent services account ID and password.
When prompted, select Grant authority. When you're returned to back to Accounting, you'll get a confirmation message at the bottom of the page.

NOTE: Once connected to Making Tax Digital, HMRC will dictate how often they expect to receive a VAT return. You will need to contact HMRC to get this changed.

Set up VAT defaults in Sage Accounting

To make sure you're using the correct VAT rate, consider setting up the default VAT rate for things you use often, like products and services or ledger accounts.

Products and Services >

Set a default VAT rate on a product or service. For example, if you sell children's clothes, you may want to set the VAT rate to Zero rated.

When you enter transactions using these products or services, we use the VAT rate you set here. You can still change this if needed when entering an invoice or credit note.

From Products, open the product or service from the list
From the drop-down list, choose the correct VAT rate.

Ledger Accounts >

Set a default VAT rate on ledger accounts.

When you enter transactions and select this ledger account, we use the VAT rate you set here. You can still change this if needed.

From Settings, then Business Settings, then Chart of Accounts.
Open the ledger account from the list.
From the drop-down list, choose the correct VAT rate.

Set up VAT for trading abroad

Sales to EU customers

This is an optional scheme to help you report and pay all EU VAT through a single return instead of having to register and pay VAT in each country you sell to. Read about EU VAT e-commerce rules.

If you want to use this scheme, choose Use destination VAT for sales to EU consumers

Postponed accounting

If you import goods from outside the UK, you can use Postponed Accounting.

With postponed accounting, you can declare and recover import VAT in the same VAT return. This is instead of paying import VAT on or soon after goods arrive and claiming it on your next VAT return. The VAT is recorded as both a sale and purchase on your VAT return, effectively cancelling each other out.

If you want to use postponed accounting for all your imports, you choose to set this by default, choose Use postponed accounting to deal with import VAT