Hi Nicola,

By default, the T2 tax code is for VAT exempt transactions, for example, education and some training, health, betting and gaming, postal services. No VAT is calculated when using T2 however, depending on the transaction type and VAT scheme, the net amount will be included on the VAT return.

By default, T9 is the default non-vatable tax code for transactions not involving VAT, for example, bank transfers. Any transactions posted with this tax code do not appear on your VAT Return.

There is also the T0 tax code, which is to be used for zero rated transactions, for example, children's clothing. No VAT is calculated when using T0 however, depending on the transaction type and VAT scheme, the net amount will be included on the VAT return.

For more information about UK VAT settings and tax codes in Sage Accounts, please read article 11217.

If required, article 14435 gives details on how to determine which tax codes to use for sales and purchase transactions.