Sage VAT codes explained

The codes you'll use every day

The one that causes most errors

T0, T2 and T9 all show no VAT. They are not interchangeable.

T0 and T2 are supplies — they belong in the net boxes on the return. T9 is outside the scope and doesn't appear on the return at all.

Code an exempt purchase to T9 instead of T2 and the VAT payable doesn't change, so nothing looks wrong. But the net figures on the return are understated, and if the business is ever partially exempt the calculation is built on wrong numbers. It's the single most common Sage VAT error, it's invisible from the ledger, and it compounds quietly for years.

Imports, exports and services since Brexit

This is where published lists most often go stale, because Sage reworked the codes when the EU rules changed and the numbering differs between versions.

Current versions include distinct codes for:

• Import of goods with postponed VAT accounting — the common treatment, where import VAT is accounted for on the return rather than paid at the border
• Import of goods where VAT is not postponed — paid at the border and reclaimed on a C79
• Services bought from overseas suppliers — subject to the reverse charge, so both output and input VAT are shown
• Sales of services to overseas customers
• Domestic reverse charge, including the construction industry version

Because the numbering varies, the safest approach is to look at the description against each code in your own tax code list rather than working from a number you remember. A code that meant one thing in an older version may mean something different now.

The construction reverse charge

Sage added dedicated codes when the CIS domestic reverse charge came in. Two things go wrong with them in practice, and neither is really about the code.

First, the charge is applied to an end user, who should be charged VAT normally. Second, people split out the materials supplied with the labour — but materials supplied as part of a CIS supply fall within the charge too.

Both produce a wrong return with the right code. There's more on this on the construction page.

Flat rate scheme

If you're on the flat rate scheme, Sage handles it through the VAT scheme setting rather than through the codes themselves, with a separate code for purchases of capital items where input VAT can still be reclaimed. Getting the scheme setting right matters more than the coding.

What happens if it's wrong

It depends which direction the error runs:

• Reclaimed VAT that wasn't due — a liability, plus interest, and potentially a penalty
• Didn't reclaim VAT that was due — simply lost money, and nobody ever notices
• T9 instead of T0 or T2 — VAT payable unaffected, net boxes wrong

Errors can generally be corrected, and HMRC's treatment is usually better where they're disclosed voluntarily rather than found during a compliance check.

This is a general reference and not advice on your own circumstances. VAT treatment depends on the specific supply, and where a position is genuinely uncertain it's worth getting it confirmed. We prepare VAT returns, statutory accounts and Corporation Tax for small and micro-entity companies; personal Self Assessment and specialist tax work are referred to a specialist firm.