As a small business in the UK, it is quite common for purchases to be made for goods and services from the EU, be that software or actual goods through Amazon and other online purchases ...
You will need to be extra careful in processing these after the 1st of January 2021 as the old EU codes we used to use to produce our EC sales list (T7 and T8 in Sage50c) are no longer needed.
"But let me run through a couple of common examples to help you understand what codes to use going forward!"
The first complication is making sure what your buying is a Service or is Goods. Normally computer software is considered to be goods, even though it can feel like a service! So, in my first example, I ran through the Sage Tax Code checker for goods purchased from abroad (outside of the UK), for example, the Netherlands that are not covered by the Northern Ireland Protocol. The VAT code is different depending on if the consignment value exceeds the import reverse charge threshold which at the time of writing is £135. That adds a complication as the code you use might change depending on how much you buy at any one time.
If the import exceeds the £135 threshold then you also need to say if you are using postponed VAT accounting, which is another level of complication. This basically allows you to account for the VAT on your VAT return rather than having to pay the VAT to the importer as they arrive at the border which is what was done previously.
This is in an attempt to improve cash flow for you at this difficult time. There are so many layers to this. So, If you are using the postponed VAT accounting for goods greater the £135 (not Northern Ireland) then you use T18 in Sage as your VAT code which is Import of Goods Postponed VAT. If you are NOT using Postponed VAT then it is T19 which is Import of Goods VAT not postponed.
If the value of the goods is less than £135 then you don't need to worry about the postponed VAT, and you would use code T17 for Import of Goods under the import reverse charge threshold. This is much simpler and probably applies to many purchases from companies like Adobe and Microsoft and other software providers.
Always look at the invoices though, and double-check what VAT codes they are using as many companies are switching to invoicing from inside the UK going forward in order to reduce admin costs so each invoice should be looked at and considered on its own merits and assumptions can't be made since 1st January.
"My head is spinning just trying to go through and put this in plain English for this blog post!"
So, my best advice to you is this: if you are struggling then seek help and advice from your accountant if you can, although they are probably just as confused. Do your best to use the correct codes. As with any changes, HMRC usually has a soft touch if you do things wrong when the systems are changing, especially at this difficult time.
Until next time ...
ALISON MEAD
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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