VAT Codes confusion

Makkusu

Hello,

I've been getting a bit confused with the VAT codes lately, I understand T1 = standard rated, T0 = zero rated, T9 = outside the scope, T2 = Exempt?

However... my brain freezes when I have to start assigning these codes to certain costs. Could someone perhaps outline some examples or explanations to simplify this for me?

HMRC website has helped me a bit but it's a bit too in depth.

My understanding so far is that (in terms of business transactions not personal goods):

T9 = Bank Interest/charges, PAYE, Wages, Dividends, VAT.
T0 = Insurance, Subscriptions, Annual filing fees, most foods.
T2 = Postage?
T1 = Most other usual things?

Please help me expand my list! Thanks.

reader

Makkusu wrote: »

Hello,

I've been getting a bit confused with the VAT codes lately, I understand T1 = standard rated, T0 = zero rated, T9 = outside the scope, T2 = Exempt?

However... my brain freezes when I have to start assigning these codes to certain costs. Could someone perhaps outline some examples or explanations to simplify this for me?

HMRC website has helped me a bit but it's a bit too in depth.

My understanding so far is that (in terms of business transactions not personal goods):

T9 = Bank Interest/charges, PAYE, Wages, Dividends, VAT.
T0 = Insurance, Subscriptions, Annual filing fees, most foods.
T2 = Postage?
T1 = Most other usual things?

Please help me expand my list! Thanks.

T0 = Zero-rated (i.e. if a business sells zero-rated items they do not have to charge output VAT but can reclaim input VAT):
New buildings
Equipment for blind or disabled people
Books and newspapers
Freight
Passenger transport
Baby wear and children's clothes
Food and drink (except alcohol, confectionery, crisps, snacks, hot takeaways, ice creams, oft drinks, mineral water)

T2 = Exempt from VAT (i.e. if a business sells exempt items they do not have to charge output VAT but are not allowed to claim input VAT and therefore do not have to be VAT-registered):
Physical education and sports activities
Betting and gaming
Care or medical treatment
Education
Postage stamps
Insurance

T9 = Outside the scope of UK VAT (i.e. transactions that have nothing to do with UK VAT laws)
Donations
MOT Testing
Congestion charge
Tolls
Bank transfers
Dividends
VAT/PAYE payments
Goods or services outside of the EU
Wages

When making entries into SAGE read the invoice carefully in order to ensure that you are using the correct T code.

Makkusu

Thank you so much Reader that's really helpful! Just started a new job and finding time very limited with studies to dig around the internet for a good layout.

Might even print this off for future reference and add to it as time goes on. I've already spotted a few mistakes I've been making, oops.

Thanks again!

reader

Makkusu wrote: »

Thank you so much Reader that's really helpful! Just started a new job and finding time very limited with studies to dig around the internet for a good layout.

Might even print this off for future reference and add to it as time goes on. I've already spotted a few mistakes I've been making, oops.

Thanks again!

How's the new job going? Is it in practice or commerce?

Makkusu

reader wrote: »

How's the new job going? Is it in practice or commerce?

It's going great thanks, it's a very fast paced accountancy firm but they're very fair with not giving newbies too much to do too soon. Should be introduced to deal with clients over the phone soon, nervous but exciting.

Hardest thing is fitting in studying, cooking, exercise and my girlfriend in the 3-4 hours I have after work!

reader

Makkusu wrote: »

It's going great thanks, it's a very fast paced accountancy firm but they're very fair with not giving newbies too much to do too soon. Should be introduced to deal with clients over the phone soon, nervous but exciting.

Hardest thing is fitting in studying, cooking, exercise and my girlfriend in the 3-4 hours I have after work!

I work for a very busy firm of accountants too.

I found speaking to clients over the phone very nerve racking to begin with because I didn't know what I was talking about. However now that I've been at my firm for nearly 3 years I quite enjoy it. You'll find that as you gain more knowledge your confidence with clients will also increase.

You'll initially be very busy with learning all about bookkeeping, accounts, VAT, tax, software, checking your work, double checking your work, stressing, learning about your workplace procedures, etc but I can confirm that things will get easier/less stressful as time goes by.

Are you doing ACCA, or planning on doing it?

goldring

we use T2 for outside EU customers
T4 for ECC member customers

as for Toll, I believe I have seen receipt has VAT on

Postage, it seems after the postal rules change in April, some are now standard rated,

It seems Sage's default code for bank interest is T2, but somehow we use T0 in our company.

All a bit confusing for me

What if you do journals, do you use T1 for standard rated income codes, instead of T9?

reader

goldring wrote: »

What if you do journals, do you use T1 for standard rated income codes, instead of T9?

Depends on the journal; if it's a year end journal, accrual, prepayment, depreciation, closing stock I use T9.

goldring

reader wrote: »

Depends on the journal; if it's a year end journal, accrual, prepayment, depreciation, closing stock I use T9.

is it the same with month end journals

reader

goldring wrote: »

is it the same with month end journals

I do year end journals rather than month end journals at work (I work in practice rather than in industry) but I would assume most, if it all, the month end journals would be done using T9. I guess the only time T1 would be used would be for a VAT adjustment, e.g. scale charge.