Sage and VAT Flat rate scheme

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  2nd Aug 2010 - 18:41 2nd Aug 2010
C M
Cleaning Team

Sage and VAT Flat rate scheme

Any book keepers or accountants with experience of Sage Instant able to tell me what the hell I need to do to account for Flat rate VAT in Sage Instant accounts?

I have found loads of articles on Google talking about cr this from there to the other place and then dr something back to somewhere else - can anyone explain in English what I need to do?

I currently am showing my VAT collected in 2200 and then my VAT claimed 2201 - normally one minus the other is the VAT done but with flat rate I take 9.5% of the gross turnover and thats what I send to HMRC but how do I then balance those two accounts? I assume I also need a new nominal account for my "profits" from flat rate VAT?

Help!!!!!!!!!!!!!!!!!!

Jason

  3rd Aug 2010 - 10:30 3rd Aug 2010
David Hardstaff
Home Counties Busine...

I don't think Sage 50 supports the flat rate scheme as such. TASBooks does, I think, as do one or two others (Kashflow/ Winweb?), but it isn't something that is covered by all systems.

However, I think the normal approach is as you suggest. You pay your flat rate percentage on the gross sales figure (including VAT), and there will obviously be a difference when this payment is measured against 'normal' VAT. I would suggest that this difference is moved via a journal posting from the balance sheet to the profit-and-loss account as income (create a new nominal account for it). This could be done annually just to reconcile the accounts, and you should end up with a few quid extra 'profit'.

If you don't, of course, then you need to drop out of the flat rate system!

  3rd Aug 2010 - 12:11 3rd Aug 2010
Andy Thackeray
Thackeray Associates...

Since you are not recovering any input (purchase) VAT*, the business costs and overheads need to be shown gross in the accounts. All cash, credit card & bank payments/supplier invoices/credit notes should be posted without VAT split off - there's no use of a/c 2201.

Sales invoices/credit notes are raised normally.

When it's time to do the VAT return, calculate your FRS VAT payment and the difference between that and the Outputs recorded on a/c 2200 (for the same period) should be moved by Nominal Journal:

Dr 2200 - VAT for the period covered by return

Cr 2202 - VAT liability for the period covered by return

Cr 4000 - Difference

The 'profit' element is additional sales, so no additional account is required.

You would then post the payment or receipt to 2202.

As always with Sage, be very careful of postings made after a VAT period with dates prior to that when doing the above calculations. It's the bane of an accountant's life tracing these around the system (along with deleted transactions).

* except for individual capital items in excess of £2k

  4th Aug 2010 - 17:42 4th Aug 2010
Leigh Jones
McCabe Ford Williams
Hi Jason I have not fully read the other posts so apologies for any duplication here. If you run the VAT wizard in the usual way for the quarter end it shoudl automatically journal the VAT into the VAT liability account 2202. You can then compare this to your 9.5% and journal the difference to a sales code. I usually have a separate code to show the profit from the flat rate VAT. Good luck
  4th Aug 2010 - 20:42 4th Aug 2010
Graham Smith
Tripod Partners

One of the reasons VAT flat rate can be a pain.

Sage 2011 (released this week can now cope, so when/if you upgrade should be better).

Andy's explanation looks good, if you are OK with doing journal entries, shout if you need help with that bit

  4th Aug 2010 - 20:51 4th Aug 2010
C M
Cleaning Team
Quote:

One of the reasons VAT flat rate can be a pain.

Sage 2011 (released this week can now cope, so when/if you upgrade should be better).

Andy's explanation looks good, if you are OK with doing journal entries, shout if you need help with that bit

As we use Sage Instant and not Sage 50, do you know if this feature is included in the latest Instant Accounts too? We are on v15 and would consider an upgrade for this feature alone.

  4th Aug 2010 - 21:06 4th Aug 2010
Fran Tyler
First Call Financials
Quote:

Since you are not recovering any input (purchase) VAT*, the business costs and overheads need to be shown gross in the accounts. All cash, credit card & bank payments/supplier invoices/credit notes should be posted without VAT split off - there's no use of a/c 2201.

Sales invoices/credit notes are raised normally.

When it's time to do the VAT return, calculate your FRS VAT payment and the difference between that and the Outputs recorded on a/c 2200 (for the same period) should be moved by Nominal Journal:

Dr 2200 - VAT for the period covered by return

Cr 2202 - VAT liability for the period covered by return

Cr 4000 - Difference

The 'profit' element is additional sales, so no additional account is required.

You would then post the payment or receipt to 2202.

As always with Sage, be very careful of postings made after a VAT period with dates prior to that when doing the above calculations. It's the bane of an accountant's life tracing these around the system (along with deleted transactions).

* except for individual capital items in excess of £2k

I am definitely with Andy on this one - he has laid it out in simplistic terms exactly as I would have told you to do it. And yes be careful if your posting dates as there is a tendency to forget to change journal dates!

If you are still not sure, give me a ring!

Fran

  4th Aug 2010 - 21:40 4th Aug 2010
C M
Cleaning Team
Quote:

Since you are not recovering any input (purchase) VAT*, the business costs and overheads need to be shown gross in the accounts. All cash, credit card & bank payments/supplier invoices/credit notes should be posted without VAT split off - there's no use of a/c 2201.

Sales invoices/credit notes are raised normally.

When it's time to do the VAT return, calculate your FRS VAT payment and the difference between that and the Outputs recorded on a/c 2200 (for the same period) should be moved by Nominal Journal:

Dr 2200 - VAT for the period covered by return

Cr 2202 - VAT liability for the period covered by return

Cr 4000 - Difference

The 'profit' element is additional sales, so no additional account is required.

You would then post the payment or receipt to 2202.

As always with Sage, be very careful of postings made after a VAT period with dates prior to that when doing the above calculations. It's the bane of an accountant's life tracing these around the system (along with deleted transactions).

* except for individual capital items in excess of £2k

Thanks Andy - the reason for tracking purchase VAT to ensure that we are actually better off using FRS than standard VAT accounting. This way I can work out each quarter if we have paid more or less VAT using FRS so we are fully informed about the pros and cons of the scheme. Is this a fair thing to do?

Obviously as I have been doing this I have a Debit showing in 2201 - how do I now remove that so it doesn't show on the balance sheet? My understanding is that if I journal it I must move it another account i.e. credit 2201 and then debit somewhere else with the amount taken from 2201? Where should that somewhere else be so it is "ignored" on financial reports etc?

Thanks

Jason

  5th Aug 2010 - 00:11 5th Aug 2010
Graham Smith
Tripod Partners

Jason - it gets credited to 4000 according to Andy's example (this is general sales, or alternatively you could put it into another nominal around the 4000s if you want to keep it separate ) - there is a code for misc income I think.

Looking at Sage instant it looks ike it still isn't there - I will give my account manager a call tomorrow to confirm

  5th Aug 2010 - 07:45 5th Aug 2010
Chris Maslin
Maslins Accountants

Jason, appreciate this isn't the answer you're looking for, but most of the online packages happily deal with the flat rate scheme. I know with FreeAgent, whilst looking at the return, you can simply turn your flat rate % on/off/on again, making it really easy to do as you say, compare whether you're better off on it or not.

Whilst you're using Sage, this calculation should be fairly easy to do manually though. Assuming you're doing VAT returns on the cash basis, just look down the receipts side of your bank, add them all up for the quarter (ignoring any transfers from other bank accounts you may have) and multiply by your flat rate %. Compare this to the "normal" figures Sage gives you.

  5th Aug 2010 - 08:36 5th Aug 2010
David Popely
DP Associates

Looks like you are well covered on this now, but if you still need any help int he form of a telephone conversation, give me a call on 07957 825714

Best wishes

David Popely
DP Associates

  5th Aug 2010 - 09:20 5th Aug 2010
C M
Cleaning Team
Quote:

Jason - it gets credited to 4000 according to Andy's example (this is general sales, or alternatively you could put it into another nominal around the 4000s if you want to keep it separate ) - there is a code for misc income I think.

Looking at Sage instant it looks ike it still isn't there - I will give my account manager a call tomorrow to confirm

Thanks Graham - I have moved the "profit" from FRS into a new code so I can track it but I still have a value in my purchase tax box (2201) which currently shows as a liability despite it obviously not being. I need to move that off my balance sheet otherwise by the end of the year it will show 4 x liabilities which are incorrect - is there either a code or a number range in the codes which it can be moved to where it will not show up on the balance sheet?

  5th Aug 2010 - 09:21 5th Aug 2010
C M
Cleaning Team
Quote:

Jason, appreciate this isn't the answer you're looking for, but most of the online packages happily deal with the flat rate scheme. I know with FreeAgent, whilst looking at the return, you can simply turn your flat rate % on/off/on again, making it really easy to do as you say, compare whether you're better off on it or not.

Whilst you're using Sage, this calculation should be fairly easy to do manually though. Assuming you're doing VAT returns on the cash basis, just look down the receipts side of your bank, add them all up for the quarter (ignoring any transfers from other bank accounts you may have) and multiply by your flat rate %. Compare this to the "normal" figures Sage gives you.

If we weren't so embedded into Sage now I would consider moving - it is unbelievable that the number 1 accounting software company in the UK does not support this especially in their small business product when FRS is designed for small businesses!

  5th Aug 2010 - 09:35 5th Aug 2010
Graham Smith
Tripod Partners

Jason

OK, the 2201 code should not have been needed (apart from capital items, I guess). Unfortunately I am not an expert in FRS workings, so I would have to look at your setup. If you would like me to do that (free of charge) PM me and I will sort out how to do that.

As an aside, KashFlow does allow migration direct from Sage very successfully. If you want to have a look go to my website and the KashFlow area, or click on the link below.

Regards

Graham

  5th Aug 2010 - 10:25 5th Aug 2010
Duane Jackson
KashFlow Software Ltd

Just to confirm, KashFlow does indeed support FRS - both for cash and non-cash accounting

Duane

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