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Sage & VAT Flat Rate Schemes

Sage & VAT Flat Rate Schemes

Hi All
I have a new client who is registering for a VAT Flat Rate Scheme and wants to use Sage 50.

As far as I can gather Sage will only deal with standard VAT and cash accounting.

Anyone got any advice/input etc on this? Would appreciate views on Sage's practicality for this and suggestions of any alternative software if Sage not suitable.
Caroline Boardman


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28th Nov 2008 09:03

Compelling Argument

Be kind to a slow-witted cornishman! - enlighten me on which compelling argument overrides the Companies Acts.

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28th Nov 2008 02:02

Wow!! Thanks for the replies!
Well, where do I start?!?!

It seems we all have differing views on how to handle the FRS so I'm going to contact HMRC and Sage and get their view - in writing!!!!

Sorry cannot remember the poster but to the guy who said post actual figures etc - the business is a recruitment agency so most inputs out of scope - ie labour! So that's my reason for believing FRS is better bet - and I have done more than enough detailed background work to believe that FRS is best for their business.

Oh, for the record, this is a sole trader business so CA rules etc are not imperative.

Additionally, to the poster who said if I'm a book keeper the accountant will sort it - I'm the bk and accountant!!!
Thanks again for the responses.

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27th Nov 2008 15:26

I'm resisting the challenge, Malcolm,
Because I reckon you already know the compelling argument, you just don't happen to like it.

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27th Nov 2008 13:06

Company Accounts

It is consistency as between current year / comparatives that I am concerned. I do not think that a statutory P&L a/c that shows:

Last Year, (pre adopting FRS): Sales £100K, Cost of Sales £50K
Current Year, (using FRS): Sales £100K, Purchases £58.75K

is showing a True & Fair view.

However, the people I really wanted to challenge me were the ones who think Turnover of Gross sales value less FRS payments is acceptable.

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By Anonymous
27th Nov 2008 11:57

I had a survey
call from a Sage representative the other day with a very pleasant Geordie accent and I mentioned this limitation to her. She duly referred to her colleague who was presumably siting next to her and informed me that Sage now caters for FRS. Time to update?

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26th Nov 2008 19:08

To confuse maybe
Wow, thanks folks for the backup there.

But... there seems to be 2 methods. See https://www.accountingweb.co.uk/cgi-bin/item.cgi?id=88285&d=1031&h=1028&f=1026

You can state costs net, and have a vat line in your accounts, but for professional reasons you may not want to.

Whatever method you choose, and I'm sure if you're a bookkeeper your client's accountant can go through this with you face to face for clarity, just be sure it's correct, and understood by all who may view the accounts, and that the preferred method is agreed to by your client.

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26th Nov 2008 18:14

Keep it simple
I agree with Lisa.
Malcolm, I disagree with your methods because it just makes things unnecessarily complicated. There’s no problem with showing expenses inclusive of VAT because all businesses that are not VAT registered do it that way.

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26th Nov 2008 17:01

Some seem to have forgotten that FRS is designed to make VAT simple for small businesses. Only clever-dick accountants could contrive to make it more complicated than the standard scheme.

Lisa is right. Case closed.

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26th Nov 2008 13:13

Companies Act
However you use or override Sage, or whatever accounts system you/clients use, companies have to report in statutory accounts turnover net of VAT, that is net as invoiced not gross less payable to HMRC on FRS. This leaves the two options of including costs net, with a credit to other income re the money made by using the FRS or apportioning the VAT paid over the inputs pro-rata. ICAEW technical enquiries agree with me that the net with separate line for bunce made is better, especially where there are Gross Profit percentages to consider. Remember that the current & comparatives need to be on the same basis.

I am sure that various people will consider the above wrong based on the guidance issued by HMRC for VAT & self-employment; I should be interested to read your views.

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By Briar
26th Nov 2008 12:51

But do you know if the FRS is worth it?
Personally, I prefer to record everything as normal (ie using T1 etc, and recording inputs net of VAT). Calculating the VAT each quarter is very simple using the relevant flat rate. But this way you see if it worthwhile using the flat rate scheme (and your clients can appreciate why you advised them to join it). When it comes to the accounts, you have one line in the P&L Account for "VAT savings".

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25th Nov 2008 16:02

Correct method
As already stated:

1.You MUST show vat at the correct rate of 17.5% or 15% on outputs.
2. Do not enter any input tax. I.e. enter all inputs as T9.
3. Printout your VAT detailed report.
4. Add the net and the vat together to get the gross. Note this on your printout.
5. Multiply the gross by the FRS percentage and note the figure on the paperwork.
6. Compete the form using the noted figures.
7. The difference in the vat reported by Sage and the FRS figure calculated is FRS income and should be journalled from the balance sheet to the P&L as income.

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25th Nov 2008 15:23

VAT hidden increases
I have checked the new FRS VAT rates for some of my clients to see what the effect will be of the changes. One for one they are .5% to 1% worse off after the changes and the excuse is that rate changes reflect the "actual" VAT costs of the area. As those on FRS do not file any input VAT information, it would appear that the Treasury is recouping some of the VAT give-away by the back door. Does anyone here have comment or spotted something I have missed? I have simply worked out what percentage of the Output VAT is "retained" by the client.

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24th Nov 2008 15:39

Not quite, Victor
Unless you have made large capital purchases you shouldn't have any input tax to transfer as your purchases/expenses should have been posted gross. You may be showing too little turnover and not enough cost.

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24th Nov 2008 13:33

manually calculate and then journal...
i print out the usual SAGE vat reports then calculate my FRS liability by reference to the (net sales + vat @ 17.5%) x 13%.

a skeleton journal was created removing the original input and output tax from nominal codes 2200/2201 to nominal code 4900 ('misc income'). the vat at 13% under FRS is then credited to 2202 (vat liability) and debited to 4900.

net result is correct liability in the BS and the 'vat profit' in P&L.

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24th Nov 2008 11:46

You are right.

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By JSJ54
24th Nov 2008 11:37

David's advice
Shouldn't the sales still be charged at 17.5% in Sage?
The flat rate percentage is applied to the total sales including VAT .

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24th Nov 2008 10:33

TAS Books 1 claims to handle the flat rate VAT scheme and would be a lot cheaper than Sage 50, which sounds like overkill for a business with a turnover of less than £150,000.

If you client needs persuading, tell them that TAS is owned by Sage.

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24th Nov 2008 09:35

It's not quite as simple as that
The make up of the totals for the VAT return is somewhat different under the Flat Rate Scheme, so you need to be clear about the differences compared to the standard scheme and do manual calculations to make sure that the correct amounts are reported on the VAT return.

There are solutions that cater for all the schemes. e-conomic is a comparable solution but much cheaper because it's an online system, so you and the client can cooperate more easily. It not only caters for the Flat Rate Scheme, it also allows for cash-based VAT accounting and calculates for you the difference between sales VAT and flat rate VAT. It will also highlight the value of any purchase VAT that has been accidentally recorded in the accounts.

Mark Davies

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By Anonymous
24th Nov 2008 09:29


Hi Caroline. You might like to see if the Chancellor reduces the standard rate today.

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By David2e
24th Nov 2008 06:21

As normal
Hi Caroline

I think the way to manage this in Sage is simply by entering purchases without any VAT (some exceptions), and enter all the sales at the flat rate percentage.

This should pick it all up just as expected for the Flat Rate Scheme.

David Toohey
The Accountants Circle

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