Vat Codes - Quickbooks expert help please

[Bridget1968]

One of my new clients is using quickbooks, I am very new to this...

I am getting abit confused of the vat codes

E = Exempt
N = Not registered
O = Out of the scope
Z = Zero Rated

If supplier isn't vat registered they goto 'N'

But I am getting abit confused on the rest...

Where do I code:

Bank charges?
Net Wages?
Dividends?
Journals?

i never know if they are zero rated, exempt etc.... and what is out of the scope????

can someone please elaborate on this or point me to a thread or website which will give me more information.

Thank you Bridget

[johndon68]

Bank charges?
Net Wages?
Dividends?
Journals?


They are all out of the scope of VAT.

John

[David Richards]

One of my new clients is using quickbooks, I am very new to this...

I am getting abit confused of the vat codes

E = Exempt
N = Not registered
O = Out of the scope
Z = Zero Rated

If supplier isn't vat registered they goto 'N'

But I am getting abit confused on the rest...

Where do I code:

Bank charges?
Net Wages?
Dividends?
Journals?

i never know if they are zero rated, exempt etc.... and what is out of the scope????

can someone please elaborate on this or point me to a thread or website which will give me more information.
The actual code you enter will be specific to the software you use - but the meaning of each code remains the same.


One easy way to remember the distinction between them is:

Things that are zero rated are generally part of day-to-day trading (they are things you might buy or sell) that are VATable, but where the rate of VAT is 0%; e.g. children's clothes, most foodstuffs, most public transport.
Things that are exempt are generally part of day-to-day trading (they are things you might buy or sell) but are exempt from VAT; e.g. insurance, some medical & dental treatments, funeral services.
Things that are out of scope are generally nothing to do with day-to-day trading (they are not things that you buy or sell) - e.g. paying wages, paying VAT and other taxes, nominal journals.
The distinction between zero-rated and exempt is subtle but important - where you sell zero-rated things you can claim back VAT on related purchases, but where you sell exempt things you can't claim back VAT on related purchases.

This is an overly-simplistic explanation and there are lots of exceptions, but it gives you the basic idea. Check the HMRC website here (http://www.hmrc.gov.uk/vat/forms-rates/rates/rates.htm) and here (http://www.hmrc.gov.uk/vat/forms-rates/rates/goods-services.htm) for more details.

[Top Hat]

The distinction between zero-rated and exempt is subtle but important - where you sell zero-rated things you can claim back VAT on related purchases, but where you sell exempt things you can't claim back VAT on related purchases.

Sorry to hijack the thread.

Can you explain this, i always thought zero rated and exempt were the same, if you paid no vat how can you claim it back?

[David Richards]

Can you explain this, i always thought zero rated and exempt were the same, if you paid no vat how can you claim it back?Let's say that your business only supplies exempt services, you don't supply anything that's standard-rated or zero-rated. Chances are that you're still going to need to buy things that have VAT added (e.g. electricity). But you won't be able to reclaim VAT on what you buy, as you don't make any VATable supplies.

Compare that to a business which only sells zero-rated things. They can reclaim VAT on the things they buy, because all of their sales are VATable... it just happens that the rate of VAT is 0%.

(Again, the previous warning applies - this is very simplistic and there are lots of exceptions.)

[Jon12345]

If I buy some goods or services from the USA for my business, would they be zero rated or exempt (or none of these!)?

Thanks,

Jon