Sage Line 50 tutorial is designed for book-keeping software, in this blog we will teach you how to use this software. In sage line 50 blog you will learn about how to install and operate Sage Line 50 and how to install on network.

How to account for VAT using the Tour Operators Margin scheme

The Tour Operators' Margin Scheme (TOMS) can be used by businesses with an establishment in the UK who buy travel, holidays and certain other services from an EC member state and sell them to a traveller, that is a person rather than a business, in the UK. The scheme was introduced as part of the EC VAT system to provide uniformity for all EC member states.

To create a VAT Adjustments nominal code

  1. Open the Company module, from the Links pane click Nominal Ledger then click Record. Sage Accounts v11.xx and below - Open the Nominal Ledger module then click Record.
    The Nominal Record window appears.
  2. Complete the Nominal Record as follows:
  • In the N/C box, enter the required nominal code, for example, 4999.
  • In the Name box, enter a name for the nominal code, for example, VAT Adjustments. Note: If you are not using the Sage default nominal structure, then you may need to use a different nominal code.
  1. To save the new nominal code, click Save. Tip: If required, to exit without saving, click Discard then click Close.
    The nominal code is saved and the Nominal Record clears.
  2. To close the Nominal Record and return to the Nominal Ledger window, click Close.
You have now created a new VAT Adjustments nominal code. You should now change your tax codes to work with TOMS, for further information about this, please refer to the following section.

To set up the new tax codes

Note: If you have already used T3, T6 or T10 for other purposes, please substitute with your own tax codes.
  1. Open the Settings menu, choose Configuration, then from the Configuration Editor window, click the Tax Codes tab. Sage Line 50 v9.xx and below - Open the Settings menu then choose Tax Codes.
    The Tax Codes window appears.
  1. From the Tax Codes list, select the T3 Tax Code then click Edit. The Edit Tax Code window appears.
  2. In the Rate box enter 0.00, select the Include in VAT return check box then click OK. The Tax Codes window appears.
    Repeat steps 2 and 3 for tax codes T6 and T10.
  3. To close the Tax Codes window and return to the program desktop, click Apply then click Close. Sage Line 50 v9.xx and below - To close the Tax Codes window and return to the program desktop, click Close.
You have now created your new tax codes and Sage Accounts is now ready to calculate VAT using the TOMS.

Tax codes to use when using the TOMS

Use the following tax codes when you enter any income and expenditure transactions under the TOMS:
  • Use T0 for zero rated items.
  • Use T1 for standard rated items not associated with Margin Scheme Supplies.
  • Use T2 for exempt items.
  • Use T3 for standard-rated SALES ONLY associated with Margin Scheme Supplies.
  • Use T4 for EC Sales.
  • Use T5 for reduced rate items not associated with Margin Scheme Supplies.
  • Use T6 for the Annual year end adjustment.
  • Use T7 for zero rated purchases from suppliers in the EC. Please note that this article can only be used when all of your supplies are liable for VAT at the same rate. This tax code should only be used for zero rated supplies that are not included in the TOMS.
  • Use T8 for standard rated purchases from suppliers in the EC that are not associated with Margin Scheme Supplies.
  • Use T9 for items which are not to be included in the VAT Return.

  • Use T10 for standard rated purchases, which are classed under Margin Scheme Supplies. If you have received an invoice, which includes VAT, enter the gross amount in the Net column and leave the VAT box as zero.

  • Use T22 for the sale of services to customers in the EC.

  • Use T23 for the purchase of zero rated or exempt services from suppliers in the EC.

  • Use T24 for the purchase of standard rated services from suppliers in the EC.
For example, when entering income transactions relating to the scheme such as sales invoices for standard rated sales, enter the gross value of the invoice in the net column with a tax code of T3 and zero in the VAT column. The amount of VAT cannot be calculated at this stage, so it is entered as zero.
When entering expenditure transactions relating to the scheme such as purchase invoices for standard rated purchases, enter the gross value of the invoice in the net column with the tax code of T10 and zero in the VAT column.

To use TOMS for the first time

If you have just registered for VAT or have just started to make margin scheme supplies, you must work out a provisional margin percentage to use during your first financial year. This may be based on any of the following:
  • Previous trading figures
  • Projected costings and margins
  • Actual quarterly figures during the first year
Whatever method you choose, the Simplified End-Of-Year annual adjustment will correct any underpayment or overpayment of VAT arising during the first year.
The provisional adjustment will be on a quarterly or monthly basis, depending on the periods used for your VAT Returns.
Before making any adjustment you must print out your Sage VAT Return and label it 'Before Adjustment'. After making your adjustment you must print out your Sage Accounts VAT Return and label it 'After Adjustment'.

Simplified End-Of-Year Calculation Method (Annual Adjustment)

You should use this method to calculate the percentage used in the Simplified Provisional Margin Calculation Method in subsequent financial years. The Simplified Provisional Margin Calculation Method is then used to calculate provisional VAT on the monthly or quarterly VAT Returns in subsequent financial years. However as the monthly or quarterly VAT Returns during the year are only calculated on a provisional basis, a year end VAT adjustment is required, which is payable or deductible on the next VAT Return immediately following the financial year end. For this annual adjustment the Simplified End-Of-Year Calculation Method is used.
Part of the procedure outlined below is based on the standard VAT Returns produced within Sage Accounts for the previous financial year.

If you did not produce your previous VAT Returns in Sage Accounts then please disregard step 1 and obtain the relevant figures for step 2 from your previous system.
  1. To assist with the year end calculations you need to obtain copies of the VAT Returns produced for the whole of the previous year. These consist of the following:

    a) The VAT Returns before any TOMS adjustments have been made. These should be labelled 'Before Adjustments'.

    b) The VAT Returns after any TOMS adjustments have been made. These should be labelled 'After Adjustments'. For example, if you previously produced monthly VAT Returns you should have 24 reports, if you produced quarterly VAT Returns then you should have 8 reports.

  2. Using the VAT Returns before any TOMS adjustments have been made, those from step 1a, obtain the following values and apply them to Section 10 of VAT Notice 709/5.

    a) Total the VAT inclusive selling price of your margin scheme sales supplied during the financial year. That is the total value of sales under tax code T3.

    From each of the VAT Returns add together the values under tax code T3 on box 6

    b) The total of the VAT inclusive purchase prices of the designated travel services included in the total at (a). That is the total value of purchases under tax code T10.

    From each of the VAT Returns add together the values under tax code T10 on box 7

  3. Using the VAT Returns after any adjustments, those from step 1b, calculate the provisional output (Sales) VAT that has been accounted for during that financial year. Add together the VAT elements under tax code T3 on box 1 from each of the VAT Returns. This value is then also applied to Section 10 of VAT Notice 709/5.

  4. From the calculations in Section 10 the yearly VAT adjustment which is payable or deductible on the next VAT Return in your new financial year is worked out. If the amount is positive this is the amount of VAT payable. If the amount is negative then this is the amount of VAT deductible.

  5. The VAT payable or deductible calculated above should be included on the first VAT Return of the new financial year. This is achieved by posting two transactions to the Customer VAT House Account, using the VAT Adjustments nominal code 4999 and dating the transaction within the current VAT period.
Now you have calculated the amount of VAT that has to be adjusted for the previous financial year, to find out how to enter the amount payable or deductible, please refer to the following sections.

To enter the year end adjustment when the VAT amount due is payable

To enter the amount of VAT payable you must:
  • Enter a sales invoice onto the VAT House Account, using the nominal code 4999. This has a net amount of zero, the T6 tax code and the amount of the adjustment in the VAT column.
  • Enter a sales credit onto the VAT House Account, using the nominal code 4999. This has a net amount of the adjustment, the T6 tax code and VAT amount of zero.

To post the sales invoice

  1. Open the Customers module then from the Links pane click Batch Invoice. Sage Accounts v11.xx and below - Open the Customers module then click Invoice.
    The Batch Customer Invoices window appears.
  2. Enter the required information in the boxes provided to record the invoice, for example, to post a £150 adjustment:
    A/C Date N/C Details Net T/C VAT
    House Current VAT period 4999 VAT adjustment 0.00 T6 150.00
  1. To post the invoice, click Save. Tip: If required, to exit without saving, click Discard then click Close.
    The invoice is posted and the Batch Customer Invoices window clears.
  2. To close the Batch Customer Invoices window and return to the Customers window, click Close.
You have successfully posted the sales invoice to record the VAT adjustment and now need to post the sales credit.

To post the sales credit

  1. Open the Customers module then from the Links pane click Batch Credit. Sage Accounts v11.xx and below - Open the Customers module then click Credit.
    The Batch Customer Credits window appears
  2. Enter the required information in the boxes provided to record the credit, for example, to post a £150 adjustment:
  3. A/C Date N/C Details Net T/C VAT
    House Current VAT period 4999 VAT adjustment 150.00 T6 0.00
  1. To post the credit, click Save. Tip: If required, to exit without saving, click Discard then click Close.
    The credit is posted and the Batch Customer Credits window clears.
  2. To close the Batch Customer Credits window and return to the Customers window, click Close.
You have now posted the sales credit to record the VAT adjustment.

To enter the year end adjustment when the VAT amount due is deductible

To enter the amount of VAT deductible you must:
  • Enter a sales invoice onto the VAT House Account, using the nominal code 4999, a net amount of the VAT adjustment, the T6 tax code and zero in the VAT column.
  • Enter a sales credit onto the VAT House Account, using the nominal code 4999, a net amount of zero, the T6 tax code and the VAT amount of the VAT adjustment.

 

To post the sales invoice

  1. Open the Customers module then from the Links pane click Batch Invoice. Sage Accounts v11.xx and below - Open the Customers module then click Invoice.
    The Batch Customer Invoices window appears.
  2. Enter the required information into the boxes provided to record the invoice, for example, to post a £150 adjustment:
  3. A/C Date N/C Details Net T/C VAT
    House Current VAT period 4999 VAT adjustment 150.00 T6 0.00
  1. To post the invoice, click Save. Tip: If required, to exit without saving, click Discard then click Close.
    The invoice is posted and the Batch Customer Invoices window clears.
  2. To close the Batch Customer Invoices window and return to the Customers window, click Close.
You have successfully posted the sales invoice to record the VAT adjustment and now need to post the sales credit.

To post the sales credit

  1. Open the Customers module then from the Links pane click Batch Credit. Sage Accounts v11.xx and below - Open the Customers module then click Credit.
    The Batch Customer Credits window appears.
  2. Enter the required information into the boxes provided to record the credit, for example, to post a £150 adjustment:
  3. A/C Date N/C Details Net T/C VAT
    House Current VAT period 4999 VAT adjustment 0.00 T6 150.00
  1. To post the credit, click Save. Tip: If required, to exit without saving, click Discard then click Close.
    The credit is posted and the Batch Customer Credits window clears.
  2. To close the Batch Customer Credits window and return to the Customers window, click Close.
You have now posted the sales credit to record the VAT adjustment.

Simplified Provisional Margin Calculation for the following financial year

When the Simplified End-of-Year Calculation Method has been used for the previous financial year then this percentage method can be used to provisionally adjust the VAT during the subsequent years. After this provisional method has been used for the next financial year, the simplified end of year method must still be used at the next year end to calculate any final adjustments.

 

To calculate the provisional amount of VAT to be adjusted during the next years VAT periods

Produce a Sage VAT Return for the period you are reconciling and label the printout 'Before Adjustments'. This print out will be used in the Simplified End-of-Year Calculation Method to establish any final adjustments to be made at the year end.

  1. Figures obtained in the previous Simplified End-of-Year Calculation Method can be applied to Section 11 of VAT Notice 709/5 to calculate the percentage adjustment value.

  2. Use the Sage VAT Return produced in step 1 above to calculate the 'Total VAT-inclusive selling price of your margin scheme sales supplied during the financial year'. That is, the total value of sales used under Tax Code T3 on Box 6. This value is then also applied to Section 11 of VAT Notice 709/5 to give the provisional TOMS adjustment to be accounted for the prescribed accounting period.

  3. To adjust the amount of VAT, post a sales invoice to the VAT House Account using nominal code 4999 with the net amount of the VAT adjustment, tax code T3 and zero in the Net column. Then enter a sales credit onto the VAT House Account using the nominal code 4999 with a VAT amount of zero, tax code T3 and VAT amount of the VAT adjustment. Allocate the credit note against the invoice through the Customer Receipts option within the Bank module.

To post the sales invoice

  1. Open the Customers module then from the Links pane click Batch Invoice. Sage Accounts v11.xx and below - Open the Customers module then click Invoice.
    The Batch Customer Invoices window appears.
  2. Enter the required information into the boxes provided to record the invoice, for example, to post a £268.09 adjustment:
  3. A/C Date N/C Details Net T/C VAT
    House Current VAT period 4999 VAT adjustment 0.00 T3 268.09
  1. To post the invoice, click Save. Tip: If required, to exit without saving, click Discard then click Close.
    The invoice is posted and the Batch Customer Invoices window clears.
  2. To close the Batch Customer Invoices window and return to the Customers window, click Close.
You have successfully posted the customer invoice to record the VAT adjustment, you now need to post the customer credit.

 

To post the sales credit

  1. Open the Customers module then from the Links pane click Batch Credit. Sage Accounts v11.xx and below - Open the Customers module then click Credit.
    The Batch Customer Credits window appears.
  2. Enter the following details in the boxes provided to record the credit, for example, to post a £268.09 adjustment:
  3. A/C Date N/C Details Net T/C VAT
    House Current VAT period 4999 VAT adjustment 268.09 T3 0.00
  1. To post the credit, click Save. Tip: If required, to exit without saving, click Discard then click Close.
    The credit is posted and the Batch Customer Credits window clears.
  2. To close the Batch Customer Credits window and return to the Customers window, click Close.
You have now posted a customer credit for the VAT adjustment, and should now allocate the credit note to the invoice. For further information about this, please press F1 to open the Help system.
Now that the amount of VAT has been provisionally adjusted for the period you should take a backup of your data and label it 'After Year End VAT Adjustment'. Reproduce the Sage VAT Return for the period you are reconciling and label the print out 'After Adjustments'. This print out will be used when calculating the Simplified End-of-Year Annual Adjustment. You have now adjusted the VAT for the period on a provisional basis.

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