Many Sage users find preparing the VAT return each quarter a worry.  So that my clients can prepare their VAT return confidently and without making any mistakes, I prepared a straight forward checklist.  My checklist is a single page on Excel and can be printed and used each quarter to ensure things go smoothly!

Vat return for the period _______ to ________

Step

1)      Ensure that all the bank accounts have reconciled up to the last day of the Vat period

2)      Now take a backup , the file name should include the transaction number, date and the words ‘Pre Vat return’

3)      To find the VAT function go to “Company” then “Financials” then Click the ‘VAT’ Button

4)      Enter the dates of your Vat return period, then click the ‘Calculate’ Button

5)      The number of transactions found for the VAT return will be shown

eg:  “1029 transactions found for this return

12 of these transactions are un-reconciled and before the specified period.

Do you want to include the un-reconciled transactions?   YES       NO”

If the second number is small click YES

If the second number is large : Contact Sloane Walker! or your accountant.

6)  Print the VAT return and summary

7)  Review the return for reasonableness, does it compare to the last quarter and is it in line with the VAT return for the equivalent 12 months ago?

8)  If the VAT return looks reasonable, print off the detailed VAT report and carry out a more thorough review of the entries on the return.

If the entires are correct go to step 9

9)  Now print off the Purchase and Sales daybooks for the quarter, along with the Bank receipts and payments daybooks.  This is recommended by HMRC although some businesses choose not to do this.

10)  Once the VAT return has been checked and approved for submission to HMRC -  Re-run the VAT return -  See steps 3 & 4

Then Click ‘Reconcile’           Sage will ask you ‘Flag transactions for VAT?’    Click YES

You can now enter the Sage VAT return figures onto the Green VAT return and submit this to HMRC once it has been signed (and a cheque sent if applicable).

11)  The last step to complete is to enter the VAT transfer journal:

Go to ‘Modules’ then ‘Wizards’ then ‘VAT Transfer wizard’    Click ‘YES’

Enter the last day of the VAT period and ensure that the sales tax amount and the purchase tax amount agree to the figures on the completed VAT return.

Click ‘Finish’

You have now completed the VAT return.

When a Limited company pays dividends to its shareholders, it is best to post (allocate) these entries to a separate nominal code on Sage.  Code 3102 ‘Dividends Paid’ is the best place for these dividends.

As these payments are NOT an allowable business expense but rather a share of the after tax profits, they should NOT be shown as a expense on the Profit and Loss account.

Ensure that when the dividend is entered into Sage, the VAT code must be ‘T9′ as dividends are outside the scope of VAT and should not be shown on the VAT return.

Any money introduced by a director, or paid out to a director must also be given the VAT code ‘T9′ so as to exclude it from the VAT return.

Click on the ‘Company’ button, then you should arrive on the ‘Nominal Ledger’ module.

At the bottom of the screen there is a button called ‘Print List’. If you click this button you will print off a list of ALL of the nominal codes.  Alternatively, click reports at the top of the page, the ‘Miscellaneous’ reports, then select ‘Nominal List’.  The advantage of this method is that you can select a range of nominal codes, rather than printing ALL the codes in Sage.

The Profit and Loss account on Sage will be excluding VAT.  One reason for this is because when the accounts figures are submitted to HMRC they are normally reported excluding VAT.

VAT is collected by a VAT registered business, any VAT suffered by the business is deducted and the balance paid over to HMRC.  Therefore the VAT payment each quarter is not actually an expense of the business.

Also the tax payment to HMRC for Income Tax is NOT a business expense and is also excluded from the Profit and Loss account.  For a Limited Company the Corporation Tax charge will be shown as a business expense, and therefore you may wish to include this on the Profit and Loss account.

Payments to HMRC for PAYE will be shown on the Profit and Loss account either in with Wages costs, or in a separate heading.

Remember also that any payments to HMRC that are for VAT or Tax should be given the ‘T9′ VAT code, this will then ensure that they are NOT included on the VAT return.

Ok, so you have discovered that you have made an error on Sage.  Imagine you made a bank transfer from your current account to your deposit account, except that instead of entering £100 into Sage you have managed to enter £1,000, what can you do?

Well if you have tried to change the error by using ‘File Maintenance’ then you may be frustrated to find that Sage will not let you change the amount from £1,000 back to £100, why not?

Well the reason for this is that certain transactions on Sage are made via a ‘Journal entry’ rather than the usual ‘bank payment’ or ‘customer invoice’ etc. If you look in the ‘type’ column next to the incorrect entry you should find the code ‘JC’ or ‘JD’.  These codes refer to a ‘Journal credit’ or a ‘Journal debit’.

If the error you are trying to correct has a ‘JD’ or ‘JC’ code then Sage does not let you alter this transaction using ‘File maintenance’.

So how can we correct this mistake on Sage?  Simple, first write down the exact details of the original transaction, date, amount, nominal account numbers etc.  Then you need to enter a ‘Journal’ for the exact opposite amounts on the same date and to the same accounts.  This will reverse out the original entry and get you back to a position as if the incorrect journal had never happened.

Using our original example you would do as follows:

Original error:

1 June 2009 Debit (JD) deposit account £1,000

1 June 2009 Credit (JC) current account £1,000

To reverse the above enter:

1 June 2009 Debit (JD) current account £1,000

1 June 2009 Credit (JC) deposit account £1,000.

As the entry is a bank transfer then you can enter this via the ‘Transfer’ button in the ‘Bank’ module.

You can now enter the correct transfer of £100 on the correct date of 1 June 2009.

If you need to enter a standard journal to correct an error then go to ‘Company’, then nominal ledger then select the ‘Journals’ button.