Hi Bic,

Thank you for using Sage City.

Can I just ask, when it comes to posting the transactions are you expecting it to have VAT on it? Do you know what boxes it should appear in, on the VAT return? 

If this has answered your question please click More > Verify Answer.

Regards,

Nicola 

Hi Nicola

Thanks for your reply. Because its non business expense, so I cant claim input VAT and I choose T6 which wont appear in teh VAT return.

but I am not 100% sure whether my method is correct. Whether I should put the VAT amount in the invoice in Tax box then later when I do the adjustment, I will deduct all the VAT related to these non business expenses.

I will really appreciate if you have any advice

Thanks

Bic

Hi Bic. I assume you are VAT registered and presumably partially exempt, so would potentially have 4 types of expense:

those that relate to taxable income so you code them as net + VAT as usual (T1);

purchases that relate to exempt income which you'd code as net + VAT using a different T code in case your partial exemption test indicates you can recover the VAT;

purchases that are shared costs which you code as net + VAT with another T code;

and those you've described relating to purely non-business which you code as gross and no VAT with yet another T code because there are no circumstances in which you can recover this VAT.

Hi Anita

yes all your comments are correct. so I am doing it correctly? Or I have to declare the VAT elements of non-business expenses too and deduct them from my VAT return later?

Thanks

Bic

Hi Bic. Yes, you seem to be doing it correctly. When you run your VAT return you need to carry out a partial exemption calculation, which is not part of Sage. This tells you how much of the VAT on shared overheads you can't recover. Before setting VAT reconciliation flags, you choose to Make Adjustments, where you would reduce the value of your total purchases (by these grant related amounts you've identified), reduce the value of VAT claimed (by the unrecoverable amount indicated by your partial exemption calculations), and reduce the value of sales (by the amount of non business income).

HI Anita. Yes I do carry out a separate VAT partial exemption on excel. 

However, you have just told me to deduct the VAT of total purchases for grant related expenses. But I dont even declare the VAT elements of these purchases (I just code them as gross and put no VAT) . So how to I know the amounts to reduce my input VAT? Are you saying I should code the VAT elements of these purchases now?

Sorry if I misunderstand you and I really appreciate your help

Thanks

Bic

You are confusing two things. It sounds like you have set your T6 to be not visible on the VAT return. Not how I would do it but if you have then you are correct that you don't need to deduct anything from the total value of purchases.

I would normally show all VAT codes other than T9 on the VAT return so I can clearly see what to transfer to the p/e calculation sheet, but then I need to deduct values from the actual return. If you are not showing these amounts to start with, it's not an issue, but it's personal choice.

I didn't say deduct the VAT of total purchases for grant related expenses, I said deduct the irrecoverable VAT identified by your p/e calculation. Sorry, it isn't easy to describe in a few sentences without seeing the data. I suggest you speak to your accountant if you need more guidance. Also, of course, you can look back at previous returns in Sage and view the adjustments to see how it has been done.

Hi Anita

Sorry its my bad. I include T6 in my return but there is no VAT value in box 4 for T6, just appear in box 7. So box 7 will have the gross amount of purchases related to non business expenses. 

Sorry for misunderstanding you

Thanks

Bic