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Sage 50 - What VAT code should I use?
What are the VAT Codes and which one should you use?
Sage 50 sets the standard UK and EC VAT Rates automatically for you, so this section assumes you have not altered your VAT codes.
This table shows the standard codes
| VAT Code | UK | Ireland |
| T0 | Zero Rated 0% | Zero Rated 0% |
| T1 | Standard Rate 17.5% | Standard Rate 21% |
| T2 | Exempt | Exempt |
| T3 | Not set at installation however, commonly used for Reduced Rate 5% | Reduced Rate 13.5% |
| T4 | Sales to EEC Vat Reg Customers 0% | Sales to EEC Vat Reg Customers 0% |
| T5 | ||
| T6 | ||
| T7 | Zero Rated purchases from EEC | Zero Rated purchases from EEC |
| T8 | Standard/reduced rate Purchases from EEC | Standard/reduced rate Purchases from EEC |
| T9 | Transactions outside the scope of VAT | Transactions outside the scope of VAT |
| T20 | Reverse Charges | Reverse Charges |
| T22 | Sales of services to VAT registered customers in EC | Sales of services to VAT registered customers in EC |
| T23 | Zero rated purchases of services from suppliers in EC | Zero rated purchases of services from suppliers in EC |
| T24 | Standard rated purchases of services from suppliers in EC | Standard rated purchases of services from suppliers in EC |
We can not explain all VAT legislation in a simple page, you need to refer to the HR Revenue and Customs for that http://www.hmrc.gov.uk/ if you have questions it is well worth discussing it with them first. They are there to help.
We believe this information was right when it was written, however, our advice is unqualified you should check with the authoritative document The Vat Guide HMRC Reference Notice 700 available to download from http://www.hmrc.gov.uk/ or an qualified accountant
Here are some examples of what VAT code goes with what products.
- T0 ZERO Rated (items such as food and books)
- T1 Standard Rated (most items are standard rated)
- T2 Exempt (some travel and postage is exempt as are trades-people who have elected not to register for VAT) Section 29 of the Vat guide give more detail. (Telling the difference between T0 and T2 can be a little tricky, on the purchases an invoice from an exempt supplier will not normally have a VAT registration number a zero rated item will show )
- T3 Reduced Rate (this is RARE it applies to some health and some energy products)
- T4 Sales to EEC Customers at 0% (note: you must have the VAT registration number of you customer, otherwise you must treat them like a UK customer)
- T7 0% Rated EEC transactions, these are transactions where your EEC based supplier has not charged VAT
- T8 These are transactions where your EEC based supplier has charged VAT
- T9 This code is used things that are outside the scope of VAT such as Wages, transferring funds from one bank account to another, insurance claims, vehicle licences, MOT certificates and local authority rates.
In some parts of VAT documentation Sales outside the EEC are described as "Outside the Scope" of VAT and in other places they are described as "Zero Rated" the reality is that they are outside the scope of VAT HOWEVER, it appears that exports should be included as part of your turnover in Box 6 (and imports in Box 7) of your Vat return so they need to be treated as Zero Rated, I would love to have clarification on this as would everyone else.
The normal practice is to include imports and exports outside the EEC as T0 as they have no VAT on them but should be included in the turnover on the VAT return boxes 6 and 7
Depending on the tax code used, items are included as part of your turnover and the VAT element is separated into the separate categories for the VAT return.
