Set up VAT and Making Tax Digital for VAT into Sage Accounting

Feb 13, 2023

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In this article, you read about set up VAT, set up VAT for trading abroad, and making tax digital with Sage accounting software.

Table of Contents

Set up VAT into Sage Accounting Software

To ensure your VAT is calculated correctly on the VAT return and before you record any transactions, double-check your VAT settings.

This explains how to

Type in your VAT registration number and VAT scheme.
Decide how often to submit VAT returns.
Give Sage Accounting permission to send HMRC VAT returns.
Set defaults to help prevent errors.
Set up VAT for international trade.

Enter your VAT Scheme and Registration Number

Select Accounting Dates & VAT under Accounting Settings in the Settings menu.
Check or enter the following in the VAT Details box.
- VAT scheme. Verify that you have chosen the right scheme. Enter the flat rate provided by HMRC for flat rate schemes.
- Submission frequency– Submission volume you can decide how frequently you send HMRC a VAT Return. How you register with HMRC determines how this works.
- VAT number– Your VAT registration number
- HMRC user ID – optional. This can be kept in this location for your records.
Begin by going to Settings, then you have to select Business Settings, then you have to choose Accounting Dates and VAT.
Check or enter the following in the VAT Details section.
- VAT scheme– Check that you have chosen the correct scheme. Enter the Flat rate% supplied by HMRC, for flat rate schemes.
- Submission frequency– You have to select how often you submit a VAT Return to HMRC.
- VAT number– Your VAT registration number.
- HMRC user ID– options. For your records, you can store this here.

Start Authorizing for Making Tax Digital (MTD) Today

You must authorize Sage Accounting for it to send VAT returns to HMRC. Every 18 months, you will need to re-authorize.

Before you start

Make that the VAT registration number and scheme are correct.
Ensure that current VAT returns are accurate and reflect the submission
Delete any unfinished VAT returns.

Authenticate MTD with HMRC

You must provide Sage Accounting permission to submit your VAT returns to comply with Making Tax Digital. To complete this process, you will require your Government Gateway login information.

Select Accounting Dates & VAT under Accounting Settings in the Settings menu.
Choose Authenticate from the Making Tax Digital option.
Select I choose Authenticate after logging into Making Tax Digital with HMRC. You are then sent to the Gov.uk website.
Select When asked, carry on, and enter your Government Gateway login information.
Enter your agent services account ID and password if you are a VAT agent.
Choose Grant authority when requested. Your session with Sage Accounting has ended. You are done when you get a confirmation message at the bottom of the page.

How to Set up VAT for Products and Services/Ledger Accounts in Sage Accounting

Verify that you are using the accurate VAT rate, and consider set up VAT default rate for things that you use often, such as products and services or ledger accounts.

Set up VAT defaults for Products and Services

On a product or service set a default VAT rate. One example is, that you may want to set the VAT rate to Zero rated in case you sell children’s clothes. The VAT rate you set here is used when you enter the transactions using these products or services. When entering an invoice or credit note you can still change this if required.

From the list open the product or service, from the products
Choose the correct VAT rate from the drop-down list.

Set up VAT defaults for Ledger Accounts

On ledger accounts set a default VAT rate. When you are entering transactions and choosing this ledger account, use the VAT rate that you set here.

First, you have to go to Settings, then you have to go to Business Settings, then click on Chart of Accounts.
From the list then you have to open the ledger account.
Choose the correct VAT rate from the drop-down list.

Simple Steps to Set up VAT for Trading Abroad

Setup VAT for Sales to EU customers

Instead of having to register and pay the VAT in each country you sell to, this is a scheme that is optional to help you report and then pay all EU VAT through a single return. You have to choose if you want to use this scheme

For sales to EU consumers use the destination

Setup VAT for Sales to Postponed accounting

You can use Postponed Accounting if you import goods from outside the UK. You can declare and recover import VAT in the same VAT return with postponed accounting. On your next VAT return, this is instead of paying import VAT on or soon after goods arrive.

On your VAT return the VAT is recorded as both a sale and purchase, successfully canceling each other out. You can select to set this default in case you want to sue postponed accounting for all your imports. Choose.

To deal with import VAT use postponed accounting.

Why Make Digital Tax for VAT into Sage

No matter which version of Sage you are using currently, you will be unable to pay your VAT returns by using the HMRC Gateway or any other software. By the end of the summer, Sage will be rolling out a new update in which Sage will be tweaked to become MTD compatible.

So, if you are currently using Sage to file your VAT returns, then it simply means that you will have to update your Sage 50 to its latest release which is MTD compliant. If you are looking forward to learning more about what impact MTD is going to have on international business and how to extend your business accordingly, get in touch with the Sage Experts at our help desk.

However, it sure promises immense opportunities with great challenges for accountants.

Suppose the income of an individual is above the VAT threshold. In that case, the individual is required to start using Digital Tax services for National Insurance Contributions and Income Tax.
Suppose the income of an individual is below the VAT threshold. In that case, the individual is required to start using Digital Tax services for National Insurance Contributions and Income Tax.
Every individual who is VAT registered is required to start using Digital Tax Services for all VAT purposes.
The individuals who pay Corporation Tax (CT) are required to start using DTS for CT.

Why MTD Unable to Authenticate with your HMRC- A Guide to Fix the Issue

This Making Tax Digital MTD error message will appear “We are unable to authenticate with HMRC” while you are trying to authenticate with HMRC or submit a VAT return into Sage software.

Causes Making Tax Digital unable to Authenticate with HMRC

The Government Gateway user ID you used for authentication is not connected to the firm VAT registration number in Sage Accounting.
Government Gateway credentials were incorrect.

Steps to Fix the MTD error unable to authenticate with HMRC.

Go to Settings, followed by Business Settings and Accounting Dates & VAT, to check the VAT registration number.
Visit the Government Gateway to verify this and make sure you can log in with the same ID and password.

Tips to Fix the Making Tax Digital for VAT Submission Errors in Sage 50

Depending on whether you are making your own MTD submission on your behalf or if you are an agent submitting on behalf of a client, HMRC systems may return this error for one of various reasons.

Try logging in again

When you log in to the HMRC website as a part of your MTD submission this error has occurred for a few reasons. You need to check certain areas to solve this issue. To try and again submit with the correct Government Gateway ID.

You have to click OK on the error window and then you have to click Cancel.
Then you have to click Submit Online and then retry the submission, check that your login details of Government Gateway are correct or not.

When you attempt to file a VAT Return for a period that is not either monthly, quarterly, or yearly, you receive this notice. Install the most recent version to resolve this.

Whenever a VAT Return for MTD is attempted to be submitted, a blank sign-in page is displayed. Sage 50 Accounts v26 has a fix for this issue.

Please try again later if you encounter problem 400.

When you log on to the HMRC website as part of your MTD submission, this can happen for several reasons. You must look in certain places to fix this.

You can speak with one of our Sage experts by calling our toll-free helpline number regarding MTD and another Sage-related query. We serve Sage clients from around the world.