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How to account for VAT group in Sage 50

We have a VAT Group for two companies - a parent and its subsidiary. There are always more transactions in the sub than in the parent company. Once I reconcile a sub VAT return in Sage 50, I put a journal to create a VAT liability. I then do a bank transfer from the sub to the parent to pay VAT to HMRC as the VAT registration and bank details given to HMRC are in the name of the parent company. Once the bank transfer to the parent is done, the VAT liability is cleared in the sub. My issue is with recording these transactions in the parent company - do I need to create intercompany debtors and creditors to record sales and purchases tax in the parent but once I create the VAT liability , the tax on sales and purchases nominals are cleared to zero in the sub. 

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By jcace
21st Mar 2018 23:44

Within the holding co, when payment is received from sub, Dr bank, Cr VAT liability. This amount is then added to Holding Co's own liability and the total is paid by Holding co to clear liability to nil.

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to jcace
22nd Mar 2018 07:19

Exactly what I was going to suggest!

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By Emilia
22nd Mar 2018 08:39

Thank you for your responses. So it is not necessary to record them on intercompany codes. My manager thinks that because the holding pays VAT therefore all VAT should be recorded in the holding interco codes as VAT is now assigned to the holding co.

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By jcace
to Emilia
22nd Mar 2018 09:51

Your holding co is the nominated company for reporting the group VAT. The VAT Return will need to include all the VAT from all group companies, so if you are submitting your VAT Return from within Sage itself, then you will need to ensure that you have included those amounts. The easiest way would be to do so via the "make adjustments" facility within Sage's VAT Return, adding in the amounts from sub co's VAT return.

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