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How To ...... Use the VAT Return

The Merlin VAT Module is located within the Nominal Ledger Module. This module contains Enquiry displays for the VAT return, Intrastat and EC Sales Lists, together with reports located in the “VAT and EC Reports“ menu option for VAT Return, Intrastat and EC Sales Lists. Additionally, the VAT Setup menu allows setup of VAT Codes and VAT groups. VAT Codes are a mandatory requirement for the analysis of transaction postings across the Nominal Sales and Purchase Ledgers to enable reporting in the VAT enquiry displays and reports described above. The “VAT Groups” feature is optional and is only required when the setup of a Merlin system requires combination of VAT statistics for multiple companies. This system feature would only be activated where the companies involved had applied to Customs and Revenues for dispensation to submit a Group VAT return for multiple companies and the application had been accepted to file a VAT return under a shared VAT registration. VAT Setup / VAT Codes Different rates of VAT apply to different types of goods and services, and there are some goods and services that aren't taxable for VAT at all. So you need to know whether VAT applies to the goods or services you sell and how much to charge. A VAT registered business has to charge VAT at the standard rate on all goods and services they supply, unless they fall into one of these categories: o o o o

zero-rated reduced-rated exempt from VAT outside the scope of VAT

For more information on VAT rates, and what is exempt or outside the scope of VAT see: http://www.hmrc.gov.uk/vat/forms-rates/rates/goods-services.htm

There are currently three rates of VAT (2013-14): o o o

Standard rate - currently 20 per cent Reduced rate - currently 5 per cent Zero rate - this is not the same as exempt or outside the scope of VAT

VAT Codes are a mandatory requirement within the Merlin system for the analysis of transaction postings in Merlin across the Nominal, Sales and Purchase Ledgers. Journal posting and Invoice posting programs within the Merlin System allocate each journal posting component to these VAT codes, which enable the Merlin VAT Return to report on transaction totals posted against each VAT code to provide VAT analysis per VAT rate.

VAT codes are Setup and Maintained in VAT code maintenance. See the screen above. This allows additional VAT codes to be added if required in future. It also allows the maintenance of existing VAT codes if VAT rates should need to change in future. The fields maintained in the form are as follows: o

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VAT Code This code will be used tagged against transaction posted against this code. The code is also assigned to stock codes in the Merlin System so VAT is charged correctly on Sales Invoices raised in the Merlin system. Description The Description field is used to assign the VAT rate description which the VAT code will be used for. In the example above VAT code 2 is used to analyse goods which are Standard rated at 20%. Additionally, In the example above the rate vale of the rate can be drawn automatically into the description of any Merlin Program drop down description labels be using the {rate} program variable in the VAT code description. This pulls the value of the rate field across into the description of the field in Merlin drop down Menus. Rate This is used to specify the Percentage value of the VAT rate required. In the example above this is 20%.

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Exclude This is used to exclude a VAT code from the VAT return report and display calculated totals. VAT codes which are setup to be excluded from the VAT return are used to deal with goods which are outside the scope of VAT. Location This is a none mandatory field which is activated by serial number. This is not normally activated as standard, but it is activated it is used to assign a geographical location to the transaction in the VAT return. (UK – Home, European – Community, Rest of World – Export) Sales Nominal This is used as a none mandatory field to allocate VAT transaction to separate VAT Nominal control accounts. Where this is not used the nominal transactions are posted to the VAT control accounts specified in the system control codes. Purchase Nominal This is used as a none mandatory field to allocate VAT transaction to separate VAT Nominal control accounts. Where this is not used the nominal transactions are posted to the VAT control accounts specified in the system control codes.

VAT Groups The “VAT Groups” feature should only be activated, where the companies involved had applied to Customs and Revenues for dispensation to submit a Group VAT return for multiple companies and the application had been accepted to file a VAT return under a shared VAT registration number. VAT Groups are added to VAT Group Maintenance using the standard File maintenance functionality. The VAT Group File maintenance contains the following fields: o

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VAT Group Name This is used to setup the VAT Group Name, which will be used for selection of VAT Groups in the VAT Return and when a company is attached to a Company in the Company file. VAT Reg No This field is used to store the VAT registration number for the VAT Group which has been provided by UK Customs and Revenues Clear Down Company This is used when the optional VAT return transaction tagging facility is activated. It relates to the Clear Down Nominal field, and specifies the company location of the Nominal Code specified in the field below Clear Down Nominal This is used when the optional VAT return transaction tagging facility is activated. The clear down Nominal is used to collect VAT balances in summary from the transaction posting VAT control accounts either setup in VAT Maintenance or in the control codes.

VAT Return Details The VAT return Details screen below is used to allow enquiry of VAT transactions for a given period or range of periods. At a VAT Quarter End the VAT return display can be used to select the three VAT periods required in the VAT Quarter to be reported on. It is also best practice to review this information at each Sales Ledger, Purchase Ledger and Nominal Ledger Period End to ensure that the VAT totals agree to the figures reported in the various Ledger control reports. For Example, checking Sales VAT to the Monthly Sales Report VAT total and checking Purchase VAT totals to the Monthly Purchase Report totals, and finally check Nominal Control Account VAT totals to the VAT return totals, and again back to the Sales and Purchase Ledger report totals once Nominal Ledger VAT adjustments have been subtracted from the control account totals. Clicking OK on the display below will run the VAT return to report the summary totals required for the submission of the VAT return.

Not all figures appearing on the VAT return display above are for submission to Customs and Revenues. The main figures for submission appear at the top of the VAT return display, and the Net Sales and Purchase figures required for the VAT return are detailed in the lower section of the screen.

The following labels appear on the display and the Values reported next to them are as follows : o

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VAT Due on Sales Total Sales (Output) VAT accumulated on Sales Invoices, Sales Postings and further Nominal Journal adjustments net of Credit Notes VAT due on EC Acquisitions Total Purchase (Input) VAT calculated on EC Acquisitions. EC Acquisitions are goods purchased from Suppliers, which are based outside of the UK, but within the European Community trade region. The VAT is calculated at the Standard VAT rate (Currently 20%) multiplied by the total Acquisitions Net of Credit / Debit Notes. This figure is then added to the VAT Reclaimed on Purchases. This adjustment consequently has a nil effect on VAT payable of the VAT entity. The adjustment is required by Customs and Revenues. Total VAT Due The addition of the two items above VAT Reclaimed on Purchases Total Purchase (Input) VAT available on Purchase Invoices / Purchase Journals and further Nominal postings and adjustments. This VAT can only be claimed from VAT registered UK Suppliers. This total also includes the “VAT due on EC Acquisitions” added to the totals Sales VAT Due.  N.B. Where goods are imported from European Suppliers outside of the UK, VAT should not normally be charged by the Supplier, if you account is setup correctly on the Suppliers accounting systems, and consequently invoices received from European supplier would be received excluding VAT. Net VAT to be paid or reclaimed The Net VAT to be paid or reclaimed consists or “Total VAT Due” less the “VAT Reclaimed on Purchases” Sales Goods (Column) Net Summary of Invoice, Credit Notes and adjustments for UK, EC, Export, Community Vatable and Inter Company transactions Sales VAT (Column) Net Summary of VAT on UK transactions only EC, Export, Community Vatable and Inter Company transactions are excluded from this total as Sales (Output) VAT can only be charged on UK transactions Purchase Goods (Column) Net Summary of Invoice, Credit Notes and adjustments for UK, EC, Export, Community Vatable and Inter Company transactions Purchase VAT (Column)  Net Summary of VAT on UK transactions only  EC, Export, Community Vatable and Inter Company transactions are excluded from this total as Sales (Output) VAT can only be charged on UK transactions Intrastat Sales Total Value of Intrastat Sales data for comparable period or range of periods selected Intrastat Purchases Total Value of Intrastat Purchase data for comparable period or range of periods selected EEC Sales Total Value of EC Sales Report data for comparable period or range of periods selected Tabbed sections For each market (UK, EC, Export, Community Vatable and Inter Company transactions) both Sales and Purchases are analysed by VAT code

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Net Goods and VAT are displayed for each VAT code. These analysis totals back up the totals on the main display.

Further detailed transaction analysis can be generated by double clicking on each VAT code to display totals of the VAT code per company (This is level is required where the VAT Group contains more than one company)

Double clicking on the Company Total then explodes out the details of the total to show all transactions included in the total for the vat code, within the company selected. This transaction level display details the transaction Year, Period, Transaction Date, Memo, Type, Nominal “Batch”, VAT “Rate”, Net “Goods”, VAT “Value” , “Company” number of the transaction, “VAT Return” where transactions have been tagged into a VAT return close down routine (Not required on Standard System), “Modified” flag to identify where transactions have been modified.

The VAT Transaction display also contains two icons in the top right hand corner of the display The first icon allows the User to print the details of all the transactions included with the company VAT code selected. This feature can be used to print the transactions to screen to then export the data into Excel. The second icon allows filters to be applied to the data held in the current form to allow the user to search for transactions within the company VAT code selected. While in the VAT transaction display, a right click context sensitive menu is available to allow the User to drill down into the transaction selected. This menu will allow the user to display Invoice details, on Sales Invoices and Purchase Invoices matched to Purchase Orders only Nominal Drill Down VAT Maintenance, (where this feature is activated via software serial number), allows maintenance of transaction details Reclassify (where this feature is activated via software serial number), allows change of VAT code or Market where this feature is activated.

Standard Process for Submitting a VAT Return o o o o o

Complete Sales Period End for last period in to period / quarter for VAT Return submission. Complete Purchase Period End for last period in to period / quarter for VAT Return submission. Make remaining Nominal Adjustments for remaining items including VAT which need to be included in the VAT Return submission. Open VAT Return Display and enter range of periods to be included in the period / quarter for VAT Return submission. Click OK to report on VAT data for inclusion in period / quarter for VAT Return submission.

In the extract taken from the revenues and customs online demonstrator, the data required to fill in the various VAT return boxes is taken from the Merlin VAT Return display as follows: http://www.hmrc.gov.uk/demo/organisation/VAT-online/submit-vatreturn/page4.html Box Box Box Box Box Box Box Box Box

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VAT Due on Sales VAT due on EC Acquisitions Total Vat Due VAT Reclaimed on Purchases Net VAT to be Paid or Reclaimed Sales Goods Column (Home + EC) Purchase Goods Column (EC Only) Sales Goods Column (Home + EC) Purchase Goods Column (EC Only)

Submit VAT return to HM Revenues and Customs Print Summary VAT Return Report and keep paper copy of PDF copy as proof of Merlin system figures on the day the VAT return was submitted. Close the Nominal Period end for the last Period submitted in the VAT Return. This will ensure the Merlin VAT Return is archived with the same totals displayed on the day when the VAT return was submitted.

Document Control Document ID: 0443 Document Version: 01 Last Updated: 23 Jan 2014 Planned Review: 23 Jan 2015