16 Jan 2012
January 16, 2012

Sage – How to Manage your VAT part 1

1 Comment

If you are a VAT registered business and still doing your bookkeeping manually, or using spreadsheets, then you really are missing a trick.  Using accounts software like Sage 50 or Sage Instant accounts makes producing the VAT return as easy as click, click, print, check, submit!

I am assuming here that you have already set up your Sage for the correct VAT system, that is, Standard, Cash Accounting, Flat rate – invoice based or Flat rate – cash based.  If you are unsure about this, check with your accountant, as you need to be sure which scheme you are on before entering any transactions into Sage.

VAT List from the Sage Help Files

Choosing the correct VAT codes to enter into Sage

First the secret is ensuring you are using the correct codes to enter your data into Sage.  When I go and train clients one of the most common problems is getting the codes for no VAT mixed up with those for zero rated and exempt VAT.  You may not think it makes a difference if you mix up T9 (transactions not involving VAT) with T0 (Zero rated transactions) or T2 (exempt transactions), but Sage treats the first code in a different way to the other two.

When transactions are exempt or zero rated,  you still need to include the net amount of the transaction in box 6 of the VAT return. T9 transactions should not appear on the return at all. I come across clients using T0 or T2 for wages, insurance and money transfer journals which means their Net Sales are being overstated.  This makes no difference to the VAT you pay, but it does mean you are sending over-inflated figures to the HMRC.

There are also particular codes to use for 5% reduced VAT on electricity and gas (T5), European Sales (T4) and European Purchases (T7 if zero rated in the UK – T8 if standard rated in the UK). These will also create your European Sales List , or the relevant notional VAT on European purchases.

As long as you have entered your transactions with these correct codes then the VAT return can be produced and checked with great ease. I actually check my VAT due at least once a month, so I can ensure I have enough money set aside and the bill will not come as a shock at the end of the quarter.

Sage VAT Window (Amounts removed)

Where is the VAT area of Sage?

First, go into the Company area of Program Manager. VAT is in the top  left Tasks area: this opens the VAT window which displays previous VAT returns   (they can be reprinted at any time) as well as the icons along the top of the screen which, used in order left to right, will take you through all the steps required to produce and submit your return.

For continuing advice on producing your VAT return then read  Sage – How to Manage your VAT – part 2.

For more practical tips on using Sage 50 and Sage Instant accounts take a look at the Sage Category on the Silicon Bullet Blog.

One Response to Sage – How to Manage your VAT part 1
  1. […] on from Sage  – How to manage your VAT part 1, here, as promised, is a guide to producing and submitting a VAT return in Sage 50 and Sage Instant […]


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