VAT Standard VAT Scheme
How to account for the decrease in the standard rate of VAT using Sage Accounts
Summary
From 1 December 2008, the standard rate of VAT will decrease from 17.5% to 15%. This article explains how this change affects Sage Accounts and what you need to do.
This article only applies to the Standard VAT scheme. If you are using the VAT Cash Accounting
Scheme, please refer to Ask Sage Article 22857.
Note: The following are not affected by the change in VAT rate:
- Zero-rated goods, for example, basic foodstuffs, children’s clothing and children’s footwear.
- Goods and services subject to VAT at the reduced rate of 5%.
Answer
The article includes the following sections:
Which VAT rate should I use?
This section explains how to determine which VAT rate to apply.
To change the VAT rate in Sage Accounts
To change the standard rate of VAT in Sage Accounts, you should edit the standard rated tax code, T1 by default.
To edit existing invoices and orders
If you have any product or service invoices that were created before the change but updated after the change, you must recalculate the VAT on each of these invoices.
To credit an invoice at the old VAT rate
There may be occasions when you need to credit invoices at the old VAT rate. If you need to do this, you should create a new tax code at the old rate of VAT.
Entering late supplier invoices
If you receive an invoice from a supplier that you need to enter at the old rate of VAT, you must manually amend the VAT amount. Before you can do this, you must select the Item VAT amendable check box. This section explains how to do this.
Which VAT rate should I use?
The rate of VAT that you should charge on your goods and services depends on:
- The VAT scheme you are using.
- The tax point of the supply.
Note: On the Standard VAT scheme, the tax point of the supply is the invoice date.
To confirm which VAT rate to apply, please contact HMRC.
Note: We are unable to advise which VAT rate you should apply in specific circumstances. If you are unsure, please confirm the correct VAT rate with HMRC.
To change the VAT rate in Sage Accounts
Note: You should make this change on 1 December 2008.
1. Open the Settings menu, choose Configuration then click the Tax Codes tab.
Sage Accounts v9 and below - Open the Settings menu then choose Tax Codes.
The tax code information appears.
2. Select T1 then click Edit.
Note: If you use a different tax code for your standard rate of VAT, select the relevant tax
code then click Edit.
The Edit Tax Code window appears.
3. Enter 15 in the Rate box then click OK.
The Edit Tax Codes window closes.
4. To apply the change, and return to the Sage Accounts desktop, click Apply then click Close.
Tip: If you are prompted to save your changes, click No.
Sage Instant Accounts v14 - Click Save then click Close.
You have successfully changed the standard rate of VAT.
Sage Accounts applies the new rate of VAT to any new transactions that use this tax code. All existing
transactions remain unchanged at the old rate of VAT.
To edit existing invoices and orders
Note: The steps below refer to invoices only. You should use the same process to amend any
relevant sales orders, purchase orders, credit notes or quotes. You should also amend any recurring
invoices or orders. For further information about this, please refer to Ask Sage Article 11748.
1. Open the Customers module then from the Links pane click Invoice List.
The Invoicing window appears.
2. Double-click the required invoice.
The invoice appears displaying the relevant items.
3. Click in the Description column of the first item that uses the standard rate of VAT then press
F3 on your keyboard.
Tip: For service invoices, click in the Details column then press F3.
The Edit Item Line window appears.
4. From the Tax Code drop-down list, choose the standard rate tax code.
Note: Although the correct tax code already appears in this box, to recalculate the VAT
amount you must select the tax code again.
The VAT amount recalculates using the new rate of VAT.
5. To close the Edit Item Line window, click OK.
6. Repeat steps 3 - 5 for any other standard rated items on the invoice.
7. To save your changes and return to the Invoicing window, click Save then click Close.
You have successfully updated the VAT amounts on the invoice. If required, repeat the process for
any other invoices that need to be updated.
To credit an invoice at the old VAT rate
Note: To determine the correct VAT rate for a particular credit note, please contact HMRC. If you
need to apply the VAT rate of 17.5%, you need to create a new tax code.
1. Open the Settings menu, choose Configuration then click the Tax Codes tab.
Sage Accounts v9 and below - Open the Settings menu and choose Tax Codes.
The tax code information appears.
2. Select the first tax code that is not in use then click Edit.
The Edit Tax Code window appears.
3. Complete the Edit Tax Code window as follows then click OK.
Rate - Enter 17.5 in this window
Include in VAT return - Select this check box.
Reverse Charge -Do not select this check box.
EC Code - Do not select this check box.
Description - Old standard VAT rate.
The Edit Tax Codes window closes.
4. To apply the change, and return to the Sage Accounts desktop, click Apply then click Close.
Tip: If you are prompted to save your changes, click No.
Sage Instant Accounts v14 - Click Save then click Close.
You have successfully created a new tax code for the old standard rate of VAT.
Entering late supplier invoices
5. Open the Settings menu, choose Company Preferences, then click the VAT tab.
Sage Accounts v12 and below - Open the Settings menu, choose Company Preferences, then
click the Parameters tab.
The VAT settings appear.
6. Select the Item VAT Amendable check box then to save your changes and return to the Sage
Accounts desktop, click OK.
You can now manually amend the VAT amount when you enter your supplier invoice.
Download the VAT Standard Scheme Accounting using Sage Accounts fact sheet as a pdf
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