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VAT Codes confusion

MakkusuMakkusu Feels At HomeBournemouthRegistered Posts: 94
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.

Comments

  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,042
    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.
  • MakkusuMakkusu Feels At Home BournemouthRegistered Posts: 94
    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!
  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,042
    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?
  • MakkusuMakkusu Feels At Home BournemouthRegistered Posts: 94
    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!
  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,042
    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?
  • goldringgoldring Feels At Home Registered Posts: 45
    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?
  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,042
    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.
  • goldringgoldring Feels At Home Registered Posts: 45
    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
  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,042
    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.
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