What adjustments are needed?

GoCardless fees are posted to your Sage 50 Accounts with a T2 tax code, which affects your VAT Return as follows:

Adjustment postings are needed to ensure the net and VAT amounts appear on your VAT Return correctly as follows:

We do this by posting a journal entry plus a VAT Return adjustment.

Posting the adjustments

Let's use the following example:

• The GoCardless fee for the VAT period was £120.00.
• The fee was originally posted to Sage 50 Accounts with a T2 tax code.
• Now split the fee into £20.00 VAT and £100.00 net.

Post a journal entry

1. On the navigation bar, select Nominal codes then press Journal entry.
2. In Reference, enter a reference, then in Posting Date enter the date of the adjustment.
3. Enter the following information:
   
   TIP:

   To check your GoCardless fees nominal code, from Settings choose Company Preferences, then GoCardless for Sage 50.
   
   

   N/C	Name	Details	T/C	Debit	Credit
   GoCardless fees nominal code	GoCardless fees nominal code	GoCardless fees VAT change	T2		20.00
   Purchase Tax Control Account	Purchase Tax Control Account	GoCardless fees VAT change	T1	20.00

4. We recommend you add a copy of the GoCardless invoice as evidence for the adjustment. To do this, press Add attachment then Browse, browse to and double-click your attachment then press OK.
5. Press Save then press Close.

VAT Return adjustment

When you run your VAT Return, the values for Box 6 and Box 7 are inflated by the VAT amount on the GoCardless fees. To correct this:

1. In the Reconcile VAT Return window, select Make adjustments.
2. For Box 6, in the Adjustment column press the pencil .
3. In the Reason column enter the reason for the adjustment, for example, GoCardless fees VAT change.
4. In the Adjustment column enter the VAT amount as a negative value, in our example you would enter -20.00, then press Save.
5. For Box 7, in the Adjustment column press the pencil .
6. In the Reason column enter the reason for the adjustment, for example, GoCardless fees VAT change.
7. In the Adjustment column enter the VAT amount as a negative value, in our example you would enter -20.00, then press Save.
8. We recommend you add a copy of the GoCardless invoice as evidence for the adjustment. To do this, choose Add attachments then press Browse, browse to and double-click your attachment then press OK.

That's it. Your VAT Return now contains the correct values. You should repeat these steps for each monthly VAT invoice from GoCardless.

What about pre-September 2020?

Following the ruling by HMRC, the way in which VAT applies to the fees charged by GoCardless changed as follows:

• Up to 13 April 2020, the fees charged by GoCardless were regarded by HMRC as being exempt from VAT.
• From 14 April 2020, GoCardless fees were subject to standard rate VAT. However, between 14 April and 31 August GoCardless absorbed this cost.
• From 1 September 2020, GoCardless started to charge VAT on all their fees regardless of your VAT status.

GoCardless issue backdated VAT invoices for the period 14 April 2020 to 31 August 2020 to assist their customers in accounting for and reclaiming the VAT. This invoice should be dealt with using the same steps above to ensure the VAT period is correct.