POSTING RCT AND VAT TRANSACTIONS ON COMPUTERISED ACCOUNTS SYSTEMS A GUIDE FOR ACCOUNTS PERSONNEL

Transcription

1 POSTING RCT AND VAT TRANSACTIONS ON COMPUTERISED ACCOUNTS SYSTEMS A GUIDE FOR ACCOUNTS PERSONNEL 1

2 CONTENTS TAS Menu Page Introduction 3 Section 1 TAS SETUP 1. Set up VAT and RCT NOMINAL CODES Set VAT Reverse Charge on TAS Set VAT Rates Section 2 Using Purchase Ledger 4 Record sub-contractors invoice Record VAT element of invoice in Supplier account Transfer VAT element to VAT Control Account Transfer RCT element to RCT Control Account Record payment to supplier VAT Control Account Enquiry Processing VAT Payment Processing RCT Payment Section 3 Using Cash Book 12 Record VAT Liability based on Invoice received Record Payment to Supplier Record RCT in RCT Control account Record RCT Payment Record VAT Payment Section 4 Once Off Transaction 17 Quick cash book journal entry for once off Invoice

3 INTRODUCTION From 1 January 2012 schools who are in receipt of construction services are regarded as principal contractors for RCT purposes and must also account for VAT on such services to Revenue. This document outlines how these transactions should be posted on the computerised accounts system. Due to the large number of schools using the TAS system, the screen shots in this document are from TAS and they are based on the following example: Mr Joe Bloggs paints the school for 10,000 and gives an invoice to the school dated which states that the main contractor must account for VAT. Reverse = *13.5%= 1,350 ROS notify the Board that 20% RCT applies 20% = * 20% = 2000 General Comments Ensure VAT is paid on time or late payment penalties may apply Schools are registered for VAT on an invoice basis so it is important that the VAT is paid online via ROS by 23 rd of the month end of the relevant two-monthly taxable period. For example the Joe Bloggs invoice in the example relates to the July August period and must be paid over to the Revenue by 23 rd September Ensure that the construction activity is correctly coded in the Accounts The example above is repairs and is coded to the Profit and Loss account. Many other construction activities which fall within the scope of RCT and VAT will be capital expenditure and should be coded to the relevant capital code, range , in the Balance Sheet. Similarly grant income received relating to such capital projects should be coded to the in the Balance Sheet. Ensure that there is an adequate system of control over VAT/RCT related transactions Schools have a statutory responsibility now to account for RCT and VAT on all relevant contracts and relevant paperwork and back up documentation should be carefully retained and filed. Failure to comply with the rules can result in substantial fines and late payment penalties. 3

4 Section 1 TAS Setup for VAT and RCT 4

5 1. Set up two new nominal codes using Program 111 a VAT Control Account (see below) And b Relevant Contract Tax (RCT) 5

6 2. VAT Reverse Charge on TAS Run Program 011 Select Standard VAT Registration Basis Input School VAT Registration Number Enable VAT Reverse Charge Scheme 6

7 3. Set up Reverse charge standard rate and lower rate on Program 031 In TAS All VAT Rates and Reporting are located in the Central Module 03 Set VAT Rate 10 as Standard Reverse Charge and rate 11 as lower reverse charge Set default rates as below 7

8 Section 2 RCT and VAT Processing in TAS using Purchase Module 3 8

9 4. Record the sub-contractors Invoice using Program 321 Enter full invoice value for creditor Use VAT Code 11 for lower VAT rate and additional screen will display VAT value Select Yes that Supplier is registered. If their VAT number is entered when setting up supplier in Program 311 then it will automatically feed in here. 9

10 5. Calculate and account for the VAT due on the service Enter VAT amount into Creditor account using 321 and enter as credit journal This step will provide an audit trail for the Revenue and for auditors and is verification that VAT was accounted for on the specific invoice. This VAT element should never be paid to the supplier. This VAT amount will form part of the VAT payment to the Revenue and in the next step 6 the value is transferred to the VAT Control account. 10

11 6. Transfer VAT element to VAT Control Account Raise a debit journal (Credit Note) using Program 322 to transfer the VAT amount from the Creditor Account to the VAT Control Account

12 Notify Sub-Contractor payment to Revenue to establish RCT rate The school must notify the Revenue of the payment to the sub contractor via ROS PRIOR to making the payment and the Revenue will issue a deduction authorisation for the payment. Step 7 below is not necessary if deduction is at zero %. If the authorisation is 20% or 35% then process step Transfer RCT amount to RCT Control Account Raise a debit journal using Program 322 to transfer the RCT amount as notified by the Revenue to the nominal RCT account

13 8. Record Payment to Supplier Process the payment to supplier using Program 351 and allocate the payment and the credits to match out the supplier account 13

14 9. VAT Control Account The VAT control account will determine the Balance due to the Revenue Using nominal enquiry program 112 the postings to the VAT Control Account should be carefully checked and the school should ensure that the postings can be agreed to actual invoices in the event of a revenue audit. Therefore careful filing of all these purchase invoices is vital. Using the VAT return manager Program 033 the VAT due can be checked to the box Reverse Charge VAT due. The information under VAT recovered should be ignored as schools are not allowed to reclaim VAT while the TAS program assumes the VAT is recoverable. Therefore this should be used only as a guideline to the return while the most important task is to check the accuracy of the postings to the VAT control account. 14

15 10. PROCESSING VAT PAYMENT Vat must be paid via ROS on the 23 rd of the month following the relevant bi-monthly return date. This payment should be processed in TAS using program 422 Note: Under TYPE Hit the down arrow key and select VAT Payment. 15

16 11. PROCESSING RCT PAYMENT The postings in the RCT Nominal account 2270 must be verified to the Revenue Deduction summary each month and the agreed amount must be settled via ROS on the 23 rd of the following month This payment should be processed in TAS using program

17 Section 3 RCT and VAT Processing in TAS using Cash Book Module 4 17

18 12. Record VAT element owing to the Revenue Upon receipt of invoice, record the VAT liability using Program 121 General Journals Important Clearly mark original invoice with Journal Posting Reference Notes You will get a warning about posting to the VAT control account but in this instance press OK and continue to process. Record the posting reference for the journal on the original invoice as - VAT Journal Reference: Take a copy of this invoice and file it sequentially as backup in your VAT return file. These copies will be useful when reviewing the VAT control account and verifying the correct VAT amount to be paid to the Revenue at each return period. 18

19 13. Payment to the Sub-Contractor The school must notify the Revenue of the payment to the sub contractor via ROS PRIOR to making the payment and the Revenue will issue a deduction authorisation for the payment. The school must provide a copy of this authorisation to the subcontractor if tax is deducted and always file a copy with the related invoice for audit trail purposes. Use Program 422 to record the payment of 8,000 (net of the RCT deduction) to the supplier AND IN ADDITION Record the RCT amount at this stage also as per step Record RCT in RCT Control Account Using Program 422 and directly under the supplier payment as per step 13 add in the following Transaction Debit the RCT amount of 2,000 as an expense Credit the amount owing to the Revenue to the RCT Control Account

20 In step 13 above when recording the Payment to the supplier use VAT code 11 and select Yes for registered and input supplier VAT registration number 20

21 15. PROCESSING RCT PAYMENT The postings in the RCT Nominal account 2270 must be verified to the Revenue Deduction summary each month and the agreed amount must be settled via ROS on the 23 rd of the following month This payment should be processed in TAS using program

22 16. RECORD VAT PAYMENT The VAT control account will determine the Balance due to the Revenue Using nominal enquiry program 112 the postings to the VAT Control Account should be carefully checked and the school should ensure that the postings can be agreed to actual invoices in the event of a revenue audit. Therefore careful filing of all these purchase invoices is vital. Vat must be paid via ROS on the 23 rd of the month following the relevant bi-monthly return date. This payment should be processed in TAS using program 422 Note: Under TYPE Hit the down arrow key and select VAT Payment. 22

23 Section 4 A quick solution for schools with a once off construction service transaction 23

24 17. Quick Cashbook Journal Entry If as a general rule the school is not usually in receipt of construction services and one invoice has to be processed for a particular VAT return period then use program 420 as follows: This would not be suitable where a number of transactions from different suppliers make up the RCT and Vat payments for the school 24