When my clients eat in at a little cafe that is NOT vat registered do I put the entry in SAGE as T9 or T0?
Put it as T0, as then the value will appear on the net purchases box (7) on the VAT return.
If you put it as T9 then it won't appear on the VAT return at all, and it should.
T9 is reserved for transactions outside the scope, so wages, drawings, payments of taxes etc.
Thanks but still uncertain
Many thanks for the reply bit in the last couple of hours I have spoken to the VAT office and was told that if the supplier is not vat registered then it should be classes as exempt / outside the scope of Vat, on the basis that they are not registered so have nothing to do with being included on a vat return! Admittedly this sounds logical but do you / anyone else think this sounds right?
Still T0 (or T1) I'd say
I'd still agree with Monsoon and suggest (shock horror) that the VAT office is wrong. The supply of service/goods in a cafe is clearly not outside the scope, even if the supplier doesn't have a high enough relevant turnover to be VAT registered.
You could even put it in as T1 and just zero the VAT field I would have thought, given that the supply would probably be standard rated if they were registered.
T9 - Out of Scope
Um, I'm going to stick my neck out here, which I may regret, but I do agree with HMRC logic on this(!): An unregistered supplier who's not required to be registered is outside the VAT system and therefore their supplies are out of scope.
This would mean using the T9 code in Sage for any purchase invoices/receipts from an unregistered supplier and not including it on a VAT return at all.
(HMRC website could be a bit more helpful here... but it does say: " Goods and services that are outside the scope of UK VAT includes anything you: sell (or otherwise supply) when you're not registered for VAT - and you don't need to be registered..."So, logically, those invoices/receipts must be out of scope in the hands of the purchaser.The link is at http://www.hmrc.gov.uk/vat/forms-rates/rates/rates.htm#5 although you will need to scroll down half a page to see the above quote)
(An unregistered supplier isn't necessarily exempt, though, because it depends on their supply - I would guess that the cafe is probably not making exempt supplies??)
2 out of 3 replies wrong! thats not good!
If they are not in VAT thay are outside the scope - T9
50:50 now, thats better.
Use the T code you would normally use
Use the T code you would use if the purchase was made from a vat registered supplier and zero out the vat.
The goods/services are vatable products but just have no vat on them as the supplier is not registered.
Or have I been doing it wrong all this time?
You learn somethng every day ...
Looks like Derek Chaplin and I have indeed been doing it wrong.
I trust Tolley's more than HMRC, and it says: "A transaction is within the scope of UK VAT if the following four conditions are satisfied .... It is made by a taxable person...."
I always used to use T9, until a chartered accountant I respect corrected me, hence my advice above.
I was under the impression that these purchases are still taxable supplies, even if not made by a registered person, and therefore had to go into box 7.
As should be working says, you learn something new every day. I will do some more research of my own and possibly change the way I do things.
Not fully convinced but it is on HMRC website so straight from the horses mouth.
I disagree though as if all sales by a non-vat registered customer were outside the vat scope, why register? You register when your vatable sales exceed the registration threshold, but all of your sales are outside the scope, hence vatable turnover is £Nil.
Sales are vatable or outside the scope by the nature of the goods/services, not the vat status of the individual and as such either form turnover for assessing your vat registartion status or they don't.
From HMRC website:
If your turnover of VAT taxable goods and services supplied within the UK for the previous 12 months is more than the current registration threshold of £70,000, or you expect it to go over that figure in the next 30 days alone, you must register for VAT. However, if your turnover has gone over the registration threshold temporarily then you may be able to apply for exception from registration see the section later in this guide for more information.
Goods and services that are outside the scope of UK VAT includes anything you:
sell (or otherwise supply) when you're not registered for VAT - and you don't need to be registered
How do you know that the cafe they are eating at "does not need to be registered" - they may have exceeded the turnover test and be incorrectly non-vat registered.
Personally I would stick with T1/T2 etc and zeroing the VAT.
At the end of the day, there is no VAT effect whichever way you do it and HMRC are unlikely to have a problem with whichever way you decide, as long as you are reasonably consistent.
"When my clients eat in at a little cafe" sounds a bit too regular to be a deductible travelling expense. If you treat it as private expenditure, you wouldn't need to concern yourselves with what VAT code to use in doing the business book-keeping on Sage.
Many thanks to all who replied - the little cafe is a generalisation for many eating establishments not just one particular cafe and are dotted around the UK.
Confusion all round!
I am surprised at the number of different theories on this.
My view is T9, and here's the reason:
The HMRC Guidence on box 7 states:
"Enter the total figure for your purchases (excluding VAT) for the period, including:
the purchases on which you paid the VAT you put in box 4..."
That means it should include the net amount of and items that have had VAT paid on them, either at 17.5%, 5% or 0% (Zero Rated). My understanding is that exepmt supplies (t2) also get included, but that's not the question.
A common misunderstanding seems to be that zero rated means no VAT - whilst it may literally be true, for VAT return purposes there is VAT on that item, it just happens to be at 0%.
Because a supplier is not registered, no VAT has been paid, so it doesn't fall into any of these categories.
The reason why I beleive this is important is because I was always led to beleive (but can't confirm) that the Revenue do credibility checks on the numbers, against their expected proportions, and whilst Box 6 x 17.5% won't work because of exempt and zero/reduced rate items, they will expect a consistent proportion within a certain business group.
If you are including non registered inputs in Box 7, this proportion could be quite different to a similar business which is not including them or the industry average, so could I suppose cause flags to be raised.
Hope that helps!
Another in the T0 camp
I have always used T0 for these entries - and will continue to do so.
Although the supplier is not VAT registered, it is still a taxable supply.
As far as the HMRC use of statistics, I understand they do query if the Output VAT does not work out compared to Net Outputs, but have never had a query raised in 25 years of preparing VAT returns when the Input VAT does not work out compared to Net Inputs.
Thankyou again to all who have replied. It's so comforting to know it's not just me who does not get it! On the plus side if my client ever do get investigated then I can produce a print out of this (excellent) discussion forum. The input is very helpful and very much appreciated. Thanks.
sub contractors to the security industry
Some of the subcontractors that I used in the past were VAT registered, but most of them were not, what tax code should I use on Sage.
Out of Scope
If they are not VAT registered then T9 (out of scope)
A transaction is within the scope of UK VAT if the following four conditions are met:
it is a supply of goods or servicesit takes place in the UKit is made by a taxable person (someone who is, or is required to be registered)It is made in the course or furtherance of any business carried on or to be carried on by that person.
Here you go: