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Non VAT registered businesses

Does anyone know what VAT code I would use on sage to post an invoice from a non vat registered sole trader who has done some artwork for packaging?.

I am not sure if i would use T0 (0% VAT) or T2 (exempt)?

Dawn Keeble


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I think I need to explain my question better.
Hi All,

I think I need to explain a little better what my partner asked Customs on my behalf regarding the VAT code for Non vat registered business.

All I wanted to know from Customs was in VAT terms what would a non vat registered business be classed under i.e Vat exempt, zero rated or out of scope. I thought that If they could tell me that then it would help me to decided which VAT code on sage I was to use.

I realised when I got thier answer that on sage T9 is out of scope and if the invoice was entered under T9 it would not be included on the VAT return, which confused me a little.

But thanks to all your help I now know that T0 is fine to use for this type of invoice.

Thanks again


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It should appear on a VAT return
Purchases made from unregistered traders should appear in Box 7 of the VAT return. you are correct, that is a VAT issue and one on which HMRC should provide answers.

However, the workings of SAGE, or any other accounting package, and the T code used within that package are not VAT issues. HMRC has no influence over how a taxpayer completes its accounts provided it meets the minimum requirements of a set of VAT accounts. The T code that must be used within SAGE to ensure the amount is recorded on the VAT return is an accounting question. I would not expect the operators of HMRC's helpline (and believe me, it hurts me to be siding with them on this) to provide the answer to this question.


Paul Taylor

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Agree with John
Sorry Paul, but this is a VAT matter. If the purchase or expense is entered on Sage with a T9 code the value will not appear in Box 7 of the Return. If it is posted as a T0 (or T1) it will. If the distinction is not important, I think we should be told!

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HMRC advice is erroneous
Paul, you state "The answer received from HMRC that the supply is outside the scope of VAT is correct". I would, respectfully, take issue with you on this statement.

If you mean that the non-VAT registered business is "outside the scope" of having to register, then that is one thing. If you meant that any supplies from a non-VAT registered business is "outside the scope" and therefore not requiring to be entered onto the VAT return, this is wholly incorrect.

To use T9 for a non-VAT registered business supply (considering the original question refers to a standard rated supply of artwork) would result in an incorrect VAT return being submitted, albeit the error may not affect the actual amount of VAT payable or repayable.

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Some the guidance
There still seems to be some confusion as to the right answer:-

Filling in your VAT return
HMRC Reference:Notice 700/12

5.7 Box 7
Put in box 7 your total purchases/inputs excluding any VAT

Thats why you use T0

Use T9 for:

5.8 Things to remember when completing boxes 6 and 7
Leave out:

VAT itself;
wages and salaries;
PAYE and National Insurance contributions;
money put into and taken out of the business by you;
loans, dividends, and gifts of money;
insurance claims;
Stock Exchange dealings (unless you are a financial institution);
MOT certificates;
motor vehicle licence duty;
Local Authority rates; and
income which is outside the scope of VAT because it is not consideration for a supply.

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On reading the posting again...
I'm not sure, Paul, that Customs were advising on which Sage T-code to use. I wouldn't expect them to offer Sage advice, either.

However, they should be able to advise, with clarity, whether the value of such a transaction should appear in the VAT Return or not. That is the matter on which they appear to be failing.

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Not really a VAT question.
This question is an accounting question not a VAT question. The answer received from HMRC that the supply is outside the scope of VAT is correct. HMRC does not have any jurisdiction over how you then enter that supply into your records of account provided the system used generates the correct VAT return figures and is fully auditable.

Indeed, I doubt very much whether an officer of HMRC manning the advice line would have any knowledge or experience of Sage, or any of the thousands of other accounting packages that taxpayers could use.


Paul Taylor
VATease - VAT Advice

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Does not this sort of duff advice being handed out by the Revenue call centres not make one shudder at the complete lack of competence displayed by these people?? It is really high time that the Revenue train their call center staff to far higher levels than being done now.

If this advice were followed, the VAT returns being submitted would be in error.

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And when you get an inspection...
Yes John, the advice they give out is really worrying.

Can you imagine telling an inspector that you left out purchases because a man on the phone told you to?

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We use T0
We always use T0 for those type of invoices and have no problems. Some of our clients have had VAT inspections over recent years and it has never been mentioned as being wrong.


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Just spoken to Inland Reveune
Hi All,

My partner has just spoken to the inland revenue and they have said that non vat registered business are out of scope so would that mean that T9 is correct?


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No Dawn
it depends on how you set up your codes of course, but assuming u r using the standard

T9 is usually for things like wages etc

you can set up your own code for non vat reistered items say T6

T0 is usually for registered traders with 0% transactions

T2 is for exempt transactions, and is useful for partly exempt businesses

on balance and it does depend on your own interpreation i would on balance use T0 as T9 is excluded.

sage putin a default TN code if you have not alreaady done so

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Definitely T0
Non VAT registered UK businesses definitely class as zero rated for VAT - ie T0 on Sage.

T2 (exempt) should only be used for exempt items as determined by HMRC - generally Bank charges, Bank interest paid, insurance payments, some rent, etc (I would hope there is a list on the HMRC website somewhere!?)

T9 (outside the scope) is for private (non-business) items, any sort of tax payments (eg. IR, VAT paid, PAYE/NI, Rates, RFL...), and wages, and also for bank charges refunds, bank interest received and insurance receipts! (or so I have been told previously by the old HMC&E).

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Thank you all for your help.


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I have always T9'ed these sort of invoices and have just been though a vat inspection a few weeks ago where the inspector asked specifically for the breakdown of the T9 code, examined some of the invoices, and was quite happy with my treatment of these items.

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sage vat code
Use T9, which is for non vat transactions

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Use T1, zero the VAT
Can't use T9, as the cost will not then appear on the VAT return. T9 is for those costs outside the scope of VAT such as wages which should not go on return.

Surely all you need to do is post the invoice in the usual way, with a T1 tax code, then amend the automatically calculated VAT to zero.

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Surely T0?
I agree with John about T9, but for the sake of reconciliations surely it's better to use T0 so that when you are checking the validity of your work, all T1 costs and sales (or payments and receipts, if cash accounting) clearly generate a 17.5% output and input tax.

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 I use T9 for items outside

 I use T9 for items outside VAT scope ie. wages, bank transfers etc.

 I use T0 for zero rated goods

 I use T2 for items within scope of VAT but supplied by suppliers not registered for vat .

 I use T1 for rated supplies.

 But make sure your VAT codes are set correctly in the settings/configuration/tax codes. hat is    the important part ! You can use any T code so long as it set correctly to transfer the data correctly to your VAT return.


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