Payment
A payment transaction is one that occurs directly through the bank account, commonly :
- Direct Debits
- Cheques
- Debit/Credit Cards
- Standing orders
- BACS & Chaps payments etc
- Online
Payments are typically to suppliers and is also used when refunding monies to a customer.
These types of payments can be set up to be memorised transactions, and be recorded automatically, see Memorised Transactions for more information.
If an entity is not registered for VAT, then there will be no references to VAT in the displayed screens, also therefore ignore references to VAT in the guide below.
Setting up a Bank Account
In order to be able to record a payment a bank account must exist. On creation of the entity an initial bank account was set up. Additional bank accounts are set up as a custom accounts. To set up a bank account the following Information is required:-
- Name and details of Bank account
- Bank Statement dated close as possible to your opening balance date
Accounts - Add a Custom Account
Reference
Enter any reference to be associated with the transaction.
Type
Indicate the type of Payment transaction that you are entering by selecting from the drop down list.
The default selection is Payment.
Date
Enter transaction date. The default is the current date. Note a difference VAT tax point date may be set if necessary.
Payee
The payee list contains any external entity, such as customers or suppliers, that are associated with the entity.
Auto-complete field names
Rather than a drop-down to select from a list, simply start typing and the system will identify any occurrences of the combination of characters entered and you select from that shorter list. As an example, type 'able' and the system will offer:
Able Contractors
Capable Cleaning
Reasonable Roofers
etc.
Adding new customers / suppliers
If the combination of characters you enter does not provide any results, press tab and the system will know you need to add the customer/supplier and ask you to confirm the details. At this point add address, email contact etc if required.
Account
Select the Bank Account associated with the transaction.
A default may be displayed if it has been set on a Bank Account Details Record. This default may be overwritten.
To set a default, if it has not already been done, navigate to the Bank menu and hover over the Bank Account that is to become the default and click Configure Account.
Tick the Default Box and then SUBMIT.
Note there can only be one default so if another Bank Account was previously set as the default its status will be reset to be not the default.
Document Storage
If a document storage option has been selected on the optional features tab of the Organisation profile then a symbol is visible.
- Link to external document storage
- indicated by
or
if a link has
already been created. Click to view document, edit or delete the link.
- Attachment for internal document storage
- indicated by or
if a document is already attached.
Click to view or delete.
Analysis Tab
Employee for P11d Purposes
Visible only if Personnel P11D Expense & Benefit Tracking has been selected in the optional features tab on the Organisation Profile.
Select an employee/director to whom this transaction is to be associated for P11D purposes.
Enter Transaction details
The line items that make up the payment value now need to be added. A line item is a value posted to an expense account extended by the VAT if appropriate.
ADD ITEM button accesses the line item input. Select the Item from the drop-down. Default values for VAT Rate (If VAT registered) are displayed. These defaults may be overridden. The system will extend the values and summarises them.
SAVE ITEM button saves that line item in the screen. Clicking ADD ITEM button on each occasion allows user to enter further Line items. UNDO ITEM cancels the current line item data.
If monies are sent to a Customer for some reason, perhaps to settle an outstanding credit note that cannot not be offset against sales invoices, use payments to place them on the customer account by, on the line item, selecting the customer account. Amounts will be visible on the customer ledger for the user to deal with subsequently.
Account
The account drop down list is used to associate the line item of a transaction with an account from the chart of accounts.
- If nothing is displayed either
- simply start typing an account name or ledger code and the system will provide a list of potential selections; choose the required account by clicking on it.
- or click the icon
- to display a list of document-type sensitive account possibilities. Note to change to other account-type options click the small down arrow at the base of the screen
- If an account is displayed
- In many instances once a counterparty (customer, supplier or employee etc) has been selected
the account box will display a default learned account. For other associated learned accounts
click the icon.
Note to change to other account-type options click the small down arrow at the base of the screen
Amount
The amount is the value of the item associated with this transaction.
Net Amount
The net amount associated with the item.
When recording purchases, if you have a gross amount and want liberty to calculate the net amount and vat amount simply enter the gross amount in this field, select the appropriate VAT code, and type "g" in the VAT amount field.
VAT Rate
The appropriate VAT rate for the account must be selected. Default VAT rates can be associated with an account via the Account Maintenance screen which is available from the chart of accounts view.
If the business is on the HMRC Flat Rate VAT Scheme, as defined on the VAT details tab of the Business Profile, the VAT rate will default to "Out of Scope" for all purchase transactions. This can be changed if necessary. Exceptions may apply for purchases of capital assets of significant value, please consult your professional advisor.
Current VAT Rates
20.0%, 5% & Zero, used for normal UK VAT transactions.
Exempt
Used when a transaction is an exempt supply; such as the purchase of insurance. See the VAT Guide (Notice 700) for more details or visit the Revenue and Customs site at www.hmrc.gov.uk
Ended 31/12/2020 except for Northern Ireland - EU Acquisition
Used when you purchase goods from a VAT registered supplier in an EU member state. Make sure that the VAT code is set to EU Acquisition, and that the VAT amount shows the VAT which would have applied if the purchase had taken place in the UK. The correct country must be set on the supplier record to ensure correct reporting of the transaction.
No longer in use , kept for historical record only - EU VAT
Only used if you have you have incurred VAT in an EU member state, (i.e. local VAT). This CANNOT be recovered as input tax for UK VAT. You may make a claim for refund from the member state. A scheme exists to do this known as "Refunds of VAT in the European Community for EC and non-EC businesses" The details are in notice 723, refer to the Revenue and Customs site at www.hmrc.gov.uk Use of this VAT code is described more fully in the "VAT and Liberty Accounts" user guide.
Out of Scope
Used when a transaction is not in the VAT system at all. For example payments into a money purchase pension scheme are out of scope because they are equivalent to savings. Recording a payment of VAT to HMRC is a common example where Out of Scope should be used, as are salary payments and repayments of director loans. Using this code will result in no VAT reporting impact.
None
This code is used where there is no VAT on a purchase transaction, typically from a supplier who is not vat registered. This is not the same as zero rated, exempt or out of scope. The impact is that the value of the purchase is included in box 7 of the VAT 100 return.
20% and 5% Domestic Reverse Charge (Used on Sales Invoices only)
Use either of these codes when a sales invoice is being raised that is subject to domestic reverse charge VAT. This has the impact of not adding a VAT amount to the invoice total but annotates that domestic reverse charge applies.
Where domestic reverse charge apples to a customer (receiving a bill with domestic reverse charge notification) see the special note below.
Average
This code can be used where there the transaction is recording an aggregation of mixed VAT codes in a single entry with the VAT amount manually set as required.
Import VAT (Used on Purchases only)
This code is used if the organisation buys goods from outside of the UK for use in the business then it may use a system called postponed VAT that allows it to account for VAT on the VAT 100 return rather than paying VAT immediately at the point of entry. This is a potentially complex area and so we strongly advise you consult with your advisor.
Special Note - Reverse Charge VAT
Reverse Charge VAT
Reverse Charge Procedure (for services from foreign suppliers)
If you are a VAT registered business in the UK and receive services from suppliers in other countries you may have to account for VAT to HMRC. This is known as reverse charge. The system provides a procedure for dealing with this.
Enter the transaction normally and select an appropriate Standard Reverse Charge VAT rate that would apply if the purchase had taken place from a UK supplier. The appropriate entries are made to the VAT100 report and any VAT transaction reports.
The system impact is to add to the VAT control account an amount of output tax (as if a sale) calculated on the full value of the supply received, at the same time add (subject to the normal rules for deduction of input tax) the same amount of VAT as input tax to the VAT control account. The net impact on VAT is zero; additionally the VAT100 return also displays sales and purchase values in the appropriate boxes.
Domestic Reverse Charge
Domestic reverse charge is essentially an anti-fraud measure and applies to a range of goods and services transacted between UK VAT registered suppliers and customers and includes:-
- Mobile Phones
- Computer Chips
- Wholesale Gas, Electricity and Telecommunications
- Emission allowances and renewable energy certificates
- Building and construction services, both buying and selling (from 1 March 2021)
For customer receiving a bill subject to domestic reverse charge
Enter the bill or payment in the normal way select an appropriate Domestic Reverse Charge VAT rate that would normally apply as notified on the bill. The appropriate entries are made to the VAT100 report and any VAT transaction reports.
The system impact is to add to the VAT control account an amount of output tax (as if a sale) calculated on the full value of the supply received, at the same time add (subject to the normal rules for deduction of input tax) the same amount of VAT as input tax to the VAT control account. The net impact on VAT is zero; additionally the VAT100 return also displays sales values in the appropriate box.
Note that the system distinguishes between domestic and non domestic reverse charge by the country stored on the supplier record.
VAT Amount
The amount of VAT charged on this item is automatically calculated based on the vat code selected but can be changed.
When recording purchases, if you have a gross amount and want liberty to calculate the net amount and vat amount simply enter the gross amount in the net amount field, select the appropriate VAT code, and type "g" in the VAT amount field.
Departments, Activities and Funds
Line item entries may be analysed to Departments and/or Activities where this has been activated. In addition, for Not-for_profit Organisations a Fund must be selected.
In each case use the drop-down to choose the analytical area appropriate to the line item. If no selection is needed just leave the field or select Not Applicable.
For information about analysis areas see Sites, Departments and Activities
Charge to Customer
Associate an item with a specific customer if the item is classed as a reimbursable expense.
Occasionally expenses are incurred by your business on behalf of a customer to whom you will invoice the expense to recover it. By selecting to relate an expense in this transaction to a customer, a report can be produced that lists all reimbursable expenses that have been recorded. You may use this report to ensure that you have invoiced all those expenses to the appropriate customer.
The report is found under the Reports Menu.
Reports - Customers - Reimbursable expenses
Note that the option to do this is set the the organisation level by ticking the Tracking Rechargeable Expenses on the organisation Profile. If the option is not selected, no customer selection drop-down is offered. To switch on navigate to the Organisational Profile.