VAT in Sage Accounting

Summary

Information on VAT in Sage Accounting.

Resolution

Supported VAT schemes

You usually select your VAT Scheme when you sign up and enter your basic company information. You must your VAT scheme before you enter any transactions to make sure you include the correct VAT.

We support the following VAT schemes:

Invoice basis

On this scheme,

you reclaim VAT when you record an invoice from your supplier
you pay VAT when you invoice your customers

Cash basis

On this scheme

you pay VAT when your customer pays you
you can't reclaim VAT on your purchases until you have paid for them

This is also called the receipts or moneys received basis.

You can use this scheme if either:

Your annual turnover is not more than €2,000,000. Or
Your supplies are almost exclusively, at least 90% made to customers who are not registered for VAT or, are not entitled to claim a full deduction of VAT

Find out more on the Revenue website (Opens in a new window).

If your company isn't VAT registered, select Not Registered.

Read about how to get set up for VAT

How we record VAT in your ledger accounts

This explains how we record VAT in your ledger accounts so you can understand how this shows on your financial reports and find out how much you need to pay the Revenue.

How the VAT element of transactions records in the ledger accounts varies depending on the VAT Scheme that you have use. Here we explain the main differences between Standard VAT and Cash Accounting

Standard VAT

On this scheme you pay or reclaim the VAT at the point you create an invoice. It does not matter if you have recorded a payment for the invoice or not
When you enter a sales invoice or other receipt , we record the VAT amount in the 2200 VAT on Sales ledger account
When you enter a purchase invoice or other payment , we record the VAT in the 2201 VAT on Purchases ledger account
When you submit a VAT return, we transfer the amounts from VAT on Sales and VAT on purchases ledger accounts to the 2202 VAT Liability ledger account to tell you how much you owe to HMRC. The balance of the VAT on Sales and VAT on Purchases Ledger accounts is now zero
If you make any adjustments or corrections after submitting the VAT return, we add the amounts to the 2203 VAT Allocations & Adjustments ledger accoun
When you pay your VAT return, we update the VAT liability ledger account with the amount of the payment. When you have fully paid your VAT, the balance of the VAT liability ledger account is zero
If you have amounts remaining in your VAT ledger accounts after you pay your VAT, you pay need to enter journals to clear these values

Clear the VAT amounts from ledger accounts

Cash Accounting

On this scheme you only pay or reclaim VAT when your customer pays an invoice you have created, or you pay your supplier for a purchase
When you enter an other receipt , we record the VAT amount in the 2200 VAT on Sales ledger account
When you create a sales invoice, we record the VAT amount 2204 - VAT on Sales Holding Account ledger account. This is so you can see how much VAT you owe once you receive payments from your customers
When you receive payment of a sales invoice, we transfer the VAT amount to the 2200 VAT on Sales ledger account. This is now reported on your next VAT return
When you enter an other payment , we record the VAT in the 2201 VAT on Purchases ledger account
When you create a purchase invoice, we record the VAT in the 2205 - VAT on Purchases Holding Account ledger account. This is os you can you see how much VAT you can reclaim, once you pay your suppliers
When you pay your supplier, we transfer the VAT amount to the 2201 VAT on Purchasesledger account. This is now reported on your next VAT return
When you submit a VAT return, we transfer the amounts from VAT on Sales and VAT on purchases ledger accounts to the 2202 VAT Liability ledger account to tell you how much you owe to the Revenue. The balance of the VAT on Sales and VAT on Purchases Ledger accounts is now zero
If you make any adjustments or corrections after submitting the VAT return, we add the amounts to the 2203 VAT Allocations & Adjustments ledger account
When you pay your VAT return, we update the VAT liability ledger account with the amount of the payment. When you have fully paid your VAT, the balance of the VAT liability ledger account is zero
If you have amounts remaining in your VAT ledger accounts after you pay your VAT, you pay need to enter journals to clear these values

Clear the VAT amounts from ledger accounts

Depending on what you buy or sell, there are several different VAT rates which might apply.

To keep things simple, we set up and update the VAT rates for you. Simply choose the appropriate VAT rate for your transaction. The VAT rates you can choose are:

Standard – 23%
Reduced Rate – 13.5%
Second Reduced Rate – 9%
Zero Rated – 0%
Exempt – Transactions are exempt from VAT. The net amount still appears on your VAT Return
No VAT – for transactions not involving VAT. These do not appear on your VAT Return

Other VAT rates

You cannot create your own VAT rates (such as the T codes in Sage 50).

Some businesses use a sub-scheme to calculate VAT differently to the Standard 20%, So to record transactions with a different VAT rate

Enter the transaction and select the Standard rate
Change the VAT value to the correct amount
This ensures that the transaction shows on your next VAT Return, and the amount of VAT is correct

Read about VAT rates

The VAT Return

The Revenue will need regular VAT return submissions. This could be once a month, quarterly or once a year.

We automatically work out VAT when you enter your transactions. The calculations take account of:

Your VAT scheme
The VAT rate you select
The location and VAT number of the customer or supplier the transaction is for

Read about how each value on the return calculates.

Depending on when your VAT return is due, you will need to:

Create the VAT return from Sage Accounting
Submit it to Revenue

Read about how to create and submit a return to Revenue.