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VAT in T1


On a requisition there are two VAT codes which are visible, the top VAT code comes from the supplier information and should match the VAT on the invoice, and the one at the bottom comes from the account code and will determine the VAT charged to the project or budget centre.

These should not be overwritten unless zero rating relief is being claimed or it is a non-UK purchase.

Sales invoicing/cash processing

Whether you are requesting a sales invoice or credit note via a form, directly entering an invoice or credit into T1 or entering a receipt, the VAT code is defaulted from the income nominal so it is important to select the correct nominal.

Difference between VAT codes X, Z and OS

Although both of these categories result in no VAT being applied to the supply, the consequence is very different between them.

Zero rating is a rate of VAT, albeit 0%, i.e. it constitutes a taxable supply. This in turn renders any supplier of zero rated goods, services liable to register for VAT. The advantage of VAT registration is that VAT can be reclaimed on costs. However, a business making solely exempt supplies is not making taxable supplies, so cannot register for VAT. Consequently, all VAT incurred upon expenditure becomes an additional irrecoverable cost.

Where a supply could be either zero-rated or exempt, zero-rating takes priority.

Zero Rated Supplies

  • Group 1 Food (exluding confectionery, hot food and food supplied by restaurants)
  • Group 2 Sewerage services and water
  • Group 3 Books (excluding ebooks)
  • Group 4 Talking books for the blind and handicapped and wireless sets for the blind
  • Group 5 Construction of buildings, etc
  • Group 6 Protected buildings
  • Group 7 International services
  • Group 8 UK public transport
  • Group 9 Caravans and houseboats
  • Group 10 Gold
  • Group 11 Bank notes
  • Group 12 Drugs, medicines, aids for the disabled
  • Group 13 Imports, exports, etc
  • Group 15 Charities, etc
  • Group 16 Clothing and footwear for children

Exempt supplies

  • Group 1 Land
  • Group 2 Insurance
  • Group 3 Postal services
  • Group 4 Betting, gaming and lotteries
  • Group 5 Finance
  • Group 6 Education
  • Group 7 Health and welfare
  • Group 8 Burial and cremation
  • Group 9 Subscriptions to trade unions, professional bodies and other public interest bodies
  • Group 10 Sport, sports competitions and physical education
  • Group 11 Works of art
  • Group 12 Fund-raising events by charities and other qualifying bodies
  • Group 13 Cultural services ― admissions to museums, exhibitions, zoos and performances of a cultural nature supplied by public bodies and eligible bodies
  • Group 14 Supplies of goods where input tax cannot be recovered
  • Group 15 Investment gold
  • Group 16 Supplies of services by groups involving cost sharing