Sage VAT Tax Codes – What’s New for 2021?

Sage VAT Tax codes

Sage VAT Tax Codes – What’s New for 2021?

Sage VAT tax codes calculate how much VAT is due on goods and services in Sage 50 Accounts software. It’s important to use the right codes as getting it wrong can result in costly penalties!

What are VAT tax codes?

Sage tax codes are applied to transactions in Sage accounts software so that you can calculate VAT tax returns correctly.

The codes are used when posting sales or purchase transactions in Sage 50cloud Accounts and Sage 50 Accounts. There are codes for each situation and service – Not sure if you’re using the right codes? Sage has a handy tax code finder you can use.

Recent Sage VAT tax code changes

There are some changes to the way we calculate VAT in the UK in 2021. To help users comply with the new legislation, there are new VAT tax codes in the latest Sage accounts software.

Brexit Tax Codes

When the UK left the EU in January, Brexit changed the way VAT is calculated for both imported and exported goods. Now all imports and exports are treated the same, regardless of their country of origin or delivery destination.

The five new sage VAT codes introduced to cover the Brexit changes are:

  • T15 Purchase of services from ROW – Reverse charge
  • T16 Purchase of services from ROW – No VAT
  • T17 Import of goods – Under import reverse charge threshold
  • T18 Import of goods – Postponed VAT
  • T19 Import of goods – VAT not postponed

Sage has created a detailed guide on Brexit tax code changes after 1 January 2021. You can see it here.

CIS Reverse Charge Tax Codes

The VAT domestic reverse charge came into force on 1 March 2021. The change means that the responsibility for paying VAT now moves from the subcontractor to the main contractor. All businesses and contractors working under the CIS scheme are affected by this change. Both main contractors and sub-contractors will need to use the new Sage VAT codes.

The new Sage VAT codes for the CIS Domestic Reverse charge are:

  • T21 to be used where CIS Reverse Charge Standard Rate applies.
  • T26 to be used where CIS Reverse Charge Reduced Rate applies.

For more information on how the CIS Reverse Charge tax codes work take a look at this in-depth article from Sage.

IR25 Off-Payroll Workers

Another tax change to take place in 2021, is the way private sector companies must tax off-payroll workers. Although this won’t affect Sage VAT codes, it will change the way contractors pay their tax.

Under the new IR35 rules, fees paid to a limited company where the contractor would otherwise be employed by the company will now be taxed the same as a salary. These changes will affect individuals supplying their services through a Personal Service Company (PCS) who would usually be employed if engaged directly. It also affects medium and large sized companies who contract work through PSC’s, and recruitment agencies who supply staff through PSC’s.

For more information on IR35 Off-Payroll tax changes read our article here.

Do you need help using the VAT tax codes within your Sage 50 Accounts software? Give our Sage experts a call on 0121 323 2304 or email us on info@softext.co.uk.

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