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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: UK Tax
Satisfied Customers: 3838
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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Hello, I have a question on products I purchase from China

Customer Question

Hello, I am new to Sage Instant Accounts and I’m also a new business. I hope you can help.


I purchase products from China and sell them to VAT registered UK businesses. The standard procedure is to pay the Chinese supplier 30% deposit upfront and then 70% balance on the week they ship the products. The final invoice can differ from original purchase order by a few per cent, as there is a usually a small manufacturing tolerance. I usually use the final invoice for my records for ease.


So for example:


 



  1. I buy t-shirts from china worth for example $15,044 USD. The final invoice I receive from the Chinese supplier for $15,044 has no VAT on it. I do twobank transfers from my UK account, 30% at start of production and 70% on shipping week totalling £10,000 ($15,044)

    • How do post these transactions/Invoices on Sage Instant.

    • What VAT/Nominal codes do I use?

    • Would I be right to use the £GBP figure debited from my bank account as the conversion figure for the $USD invoice? I assume this would make things much easier to reconcile?




 



  1. I use a shipping company/customs agent to deliver the goods to my client in the UK. I receive two invoices from my shipping company.

    • One for freight (£700), shipping insurance (£30) and duty deferment fee (£20), all showing zero VAT.

    • One showing the duty and VAT. The duty at 12% with zero VAT and the import VAT which also says zero VAT. I work out the duty to be £10,000 x 12% = £1,200. The VAT is (£10,000 + £1,200 + £700 + £30 + £20) x 20% = £2,390

    • I want to know.




i. How do I post these two invoices on Sage Instant?


ii. What VAT/Nominal codes do I use?



  • I don’t know if this is relevant but on the HMRC website it says it uses the total of the value of the goods PLUS shipping/freight costs, shipping insurance, duty and deferment fee to work out the Import VAT.

  • For Duty the rate is the price on the Chinese invoice. “Generally the value used is the free on board (FOB) value of the goods, which is the value of the goods excluding overseas transport and insurance”.


 



  1. Weeks later I receive a form C79 from HMRC showing that I have paid import VAT. I read somewhere that if you have a commercial shipping invoice, packing list, Bill of Lading (which I do) you do not have to wait for the C79 form to reclaim import VAT.

  2. I want to reclaim VAT asap to help with my cash flow so should I just file the C79 form for my records, or do I have to post it on SAGE somewhere?


I hope these details help in getting an answer


 


Many Thanks


 

Submitted: 1 year ago.
Category: UK Tax
Expert:  Rakhi Vasavada replied 1 year ago.
Dear Friend,

Hello and welcome. Thank you for using Just Answer.

I appreciate that you have detailed your question and therefore, it is easier to understand. Let me come to the point.

To begin with, you are correct to assume that you should use the £GBP figure debited from your bank account as the conversion figure for the $USD invoice. This will be more accurate.

Having said this, it would be posted as under.

Purchase A/c DR
To Bank Account.

(You will post this transaction twice, one for 30% and the another for 70%)

Regarding what VAT code to use, kindly refer the below table. Note that Sage Line 50 sets the standard UK and EC VAT Rates automatically for you, so this section assumes you have not altered your VAT codes.

http://support.makingithappen.co.uk/sage-50-guides/what-vat-code.htm


Secondly, note that you have properly / correctly calculated the following.

  • One for freight (£700), shipping insurance (£30) and duty deferment fee (£20), all showing zero VAT.

  • One showing the duty and VAT. The duty at 12% with zero VAT and the import VAT which also says zero VAT. I work out the duty to be £10,000 x 12% = £1,200. The VAT is (£10,000 + £1,200 + £700 + £30 + £20) x 20% = £2,390
For VAT Code, which Sage sets automatically, refer.

http://support.makingithappen.co.uk/sage-50-guides/what-vat-code.htm



You will post it as under.

Purchase A/c Dr 10,000
Freight A/c DR 700
Shipping Insurance A/c DR 30
Duty deferment Fee A/c DR 20
VAT A/cDR 2390
TO Bank A/c 13140


It is correct that HMRC uses the total of the value of the goods PLUS shipping/freight costs, shipping insurance, duty and deferment fee to work out the Import VAT.

Further to this, note that to C79 is mandatory before you can reclaim the VAT. It would be reclaimed only after your invoice numbers tally with those of C79.

YES, you will have to post C79 in Sage. Rather than explaining here and make it complecated, I point you to the following link. It is very nicely explained in very lucid manner.

http://www.book-keepers.org.uk/t33664454/c79-form-how-to-post-in-sage/?page=1


I am sure this would help.

You may please leave a positive rating if this helps as that is the only way we receive credit for assisting you. Alternatively feel absolutely free to revert with more queries if you have.

Warm Regards

Customer: replied 1 year ago.

My two main questions were which VAT codes to use and what nominal codes do I use, these questions were not answered.

Expert:  Rakhi Vasavada replied 1 year ago.

Dear Damien,

Hello and welcome again. Thanks for your follow up question.

 

There is no need for a negative rating. You can certainly continue the conversation if your queries are not resolved. Negative ratings adversely affects us. However, you can certainly replace them with a positive rating.

As I mentioned in my above reply, Sage Line 50 sets the standard UK and EC VAT Rates automatically for you. However, they would be as under:


T0 for zero rated,
T1 for the standard rate and T9 for the exempted ones.

Regarding nominal codes to be used in Sage, note that Sage codes are organied in a very logical way.

Purchases ( sage accounts starts with 5000 and thet are between 5000 and 5999)
Direct expenses for Sales and Purchases ( sage accounts starts with 6000 and thet are between 6000 and 6999)
Expenses ( sage accounts starts with 7000 and thet are between 7000 and 7999)

I am sure this would help.

You may please leave a positive rating if this helps as that is the only way we receive credit for assisting you. Alternatively feel absolutely free to revert with more queries if you have.

Warm Regards

Customer: replied 1 year ago.

Hi rakhivasavada,


 


I'm not sure your reply answers my question, or am I miss-understanding something?


 


Its Sage Instant (which I am using) the same as Sage Line 50? I've not mentioned sage line 50 anywhere.


 


I don't need EC VAT rates as I don't purchase or sell to anyone in the EC.


 


I already knew T0 for zero rated, T1 for the standard rate and T9 for the exempted ones - my confusion was which ones to use and when. For the example I sent you (the Chinese invoice, the Shipper Invoice and the C79 form) the which elements would be T0, T1 and T9 and which nominal codes would I use on Sage Instant Accounts for each element)??


 


Many thanks



Damien


 


 


 


 


 


 

Expert:  Rakhi Vasavada replied 1 year ago.
Dear Damien,

Yes, It seems you have little misunderstood. Yes, Sage (newer version) works in similar fashion.

Ignore EC rates since you do not buy from it.

I thnik I mentioned the nominal codes as well.

Regarding nominal codes to be used in Sage, note that Sage codes are organied in a very logical way.

Purchases ( sage accounts starts with 5000 and thet are between 5000 and 5999)
Direct expenses for Sales and Purchases ( sage accounts starts with 6000 and thet are between 6000 and 6999)
Expenses ( sage accounts starts with 7000 and thet are between 7000 and 7999)

Let me know if this helps. I am not sure if you were able to see the above reply.

KINDLY DO NOT RATE NEGATIVE. If this does not help, let me know and I shall immediately OPT OUT and see if other expert can assist you with.

Alternatively, you can rate positive if this helped.

Warm Regards
Customer: replied 1 year ago.

Hi,


 


Was just about to add this in but had already replied. I had already read the link you sent to me about posting the C79 form, but was not sure if this was correct. I've visited other on-line VAT specialist websites that disagreed with the answer there - are you 100% that its all correct?



Yes, I had seen your link about nominal codes, there seems to be lots and lots of codes on Sage Instant (grouped like you said above) but I'm unsure of which codes within these groups to use on Sage Instant - that's why I posted the question about the nominal codes. Also, the VAT code to use for each line of the invoice. I've never done accounts before and never used a accounts package before.



If you can help answer these original questions, that would be great.



Thanks



Damien



Expert:  Rakhi Vasavada replied 1 year ago.
Dear Damien,

I understand your problem, but primary knowledge to post accounting entries would be essential if you were to act on the advices given, by me or for that matter anyone else.

I have tried to give all possible information, all relevant information that I can to the best of my efforts.

I am opting out and see if other expert can assist you with that. You have option to get your accounting done locally from a local accountant if you find it difficult to use Sage and post entries.

Wish you good luck. Hope to assist you in future..

Warm Regards

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