We have set out accounts up as follows
2200 - sales VAT Control account
2201 - Purchase VAT control account.
We also have a number of T codes for VAT analysis.
This year we have had a number of journals using both Debits and credits, where we have changed T-code analysis in account 2200.
However when we run the VAT at the end of each quarter, the VAT debit journals from 2200 output tax, are included in Box 4 - VAT input tax. the VAT credit journals are included in Box 1, as they should be.
The same thing is also happening in relation account 2201, purchase VAT, journal debits are correctly included in Box 4, whereas journal credits are included in Box 1.
This has been highlighted because we use the figures from the VAT return to clear down the control accounts at the end of each quarter, and at the year end the VAT control accounts were not zero.
It has highlighted an issue with SAGE, but also highlights issues with the controls as well.
It is made worse for us as we are a partially except organisation for VAT purposes, so increasing our inputs with Sales VAT control account debits, also increases our VAT irrecoverable
I would suggest that the calculation of the VAT boxes should be changed so that -
a) Box 1 only has items from account 2200, and takes account of both credit and debit journals
b) Box 4 only has items from account 2201 and takes account of both debit and credit journals
This should mean that at the end of each quarter, the amounts in the ledger control accounts should equal the amounts in box 1 (ledger account 2200) and box 4 (ledger account 2201). Then differences can be easily identified and addressed
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