First, you need to check if you are trading under the Northern Ireland Protocol. Do look this up in detail on the Sage support site, but basically, if you have a BT postcode and if your VAT registration certificate shows a type of business that is not solely involved in the provision of services, you will need to put an XI prefix in front of your VAT number when communicating with an EU customer or supplier instead of GB.
If you are in the rest of the UK then you should have already visited www.gov.uk/transition to check the HMRC advice on what is required and applied for an Economic Operator Registration and ID (EOR) number and then entered your EORI number in your software.
You also need to install the latest software update which will introduce some new tax codes to help you process EU and non-EU imports and exports ROW (Rest of the World).
When processing your invoices after 1st January you need to first consider any services which span the change date, and invoice the proportion of the service or hours to two different VAT codes over the change.
For example, if you are invoicing for 10 hours, of which 3 hours were done before the 1st of January 2021 and 7 hours were done after that date, you will need to post two separate invoices for the two periods and use the different VAT codes.
When posting product invoices it depends when the goods were in transit. If items were delivered or in transit before 1st January then you treat them the old way. If the item had not left the suppliers as of the transition date then you treat them in the new way.
"Which tax codes should I use from the 1st of January 2021 in the UK?"
Sage has a really handy tax code finder you can follow to work out which codes to use going forward. There are too many choices to go into within this blog post, but I will follow through one example so you can see how this works.
Each page gives you a choice to drill down what you are supplying to give you the final tax code. Do note that if you do not use the standard Sage tax codes then you may need to amend the final choice for your business.
In my example, I am choosing a SALE OF GOODS TO ABROAD (Not covered by the Northern Ireland Protocol) where I have proof of exportation as defined by HMRC public Notice 703. This gives me T0 so there is no VAT, but the Net amount appears in Box 6 of the VAT return.
It may seem quite complicated, but once you have followed the process for your particular business you will most likely end up with a shortlist of codes you use for all your customers and suppliers.
Remember, you can change the default tax codes for existing customers and suppliers and remember to tick the 'Use Default Tax Code for Sales/Purchases' for any customers or suppliers outside of the UK so you won't need to remember the codes.
"Sage will do it for you!"
If you are struggling with the setup and working out what you need to do then it might be the ideal time to arrange a 1-2-1 handholding session to go through everything with me so you can ensure you have all your bookkeeping correct going forward.
Until next time ...
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more, it may be a great idea to give me a call on 01604 217365 and let's see how I can help you.
Alison loves bookkeeping and supporting bookkeepers. She has been helping clients to be better bookkeepers in Sage 50 for over 24 years and has been Xero Accredited in accounts and payroll for a number of years too.
She specialises in a very unique hand-holding method of training, helping bookkeepers and business owners to use their accounts software as and when they need support in setting up and producing their invoices, reports and financial information.
Alison combines her role at Silicon Bullet with her Forever Living network marketing businesses and is often to be seen at business networking meetings as she likes to keep busy.
You know what they say: if you want something done well ask a busy person!
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