In VT Transaction+ each analysis account has a VAT scope setting. This setting can be changed by choosing the Set Up > Accounts > All command and then by double-clicking on an account and unticking/ticking Entries analysed to this account are normally within the scope of of VAT.
If you change the VAT scope of an analysis account, you will be asked if you want to change the VAT scope of all previous transactions entered to this account.
You can check the VAT scope status of all accounts by selecting Set Up > Accounts > All and inspecting the Within VAT scope? column:
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Right-click on the transaction in any report and select Edit Transaction from the pop-up menu. In the Edit Transaction dialog, the Within the scope of VAT tick box for each analysis entry must be changed.
Screenshot of the Edit Transaction dialog where the Within the scope of VAT option can be selected
A transaction is automatically given a VAT entry if it has at least one analysis entry that is within the scope of VAT. You cannot directly create or delete the VAT entry in the Edit Transaction dialog. Instead, you have to tick or untick the Within the VAT Scope of VAT box for the analysis entry (or entries).
Changing a zero-rated transaction to outside the scope of VAT
You can also change a transaction with a zero amount of VAT to outside the scope of VAT by right-clicking on it in an unsaved VAT return and choosing the Change Transaction To Outside The Scope Of VAT option from the pop-up menu. Once again, you are asked if you want all other transactions in the same analysis account to be changed.
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Common mistake #1
A common mistake is to assume that a transaction is outside the scope of VAT when it is not. The list of transactions that are outside the scope of VAT per HMRC is quite small. In particular, all supplies that are zero rated, exempt or from unregistered suppliers should be included in your return.
For details of VAT rates for different goods and services, please refer to HMRC guidance here.
Common mistake #2
Another common mistake is to assume that all items that are outside the scope of VAT are excluded form the VAT return.
HMRC guidance is unclear but indicates that items that are outside the scope of VAT because they are 'not consideration [payment] for a supply [of goods or services]' (e.g. voluntary donations to charity) should be excluded from the VAT return:
VAT Notice 700/12 Section 3.8
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'...do not include the value of any of the following:
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•expenditure that’s outside the scope of VAT because it is not consideration for a supply' |
This implies that income/expenditure that is outside the scope of VAT, but is 'consideration for a supply', should be included, for example, sales of services to customers outside the UK where the place of supply is outside the UK (see Should boxes 6 and 7 include overseas supplies?).
