VAT re bank interest?

[Pot Bellied Fool]

On the basis that PH is the font of all knowledge

Just catching up on the bookwork and entering stuff into Sage.

Just about to enter a small amount of interest paid by the bank when a thought struck me - what about the vat?

Sage was expecting it to be a T1 entry for that nominal (i.e non-exempt) and although I can change that easily enough it made me stop & think because I was expecting it to be T0 (zero rate).

I've had a look in the VAT Guide & online but can't find anything, so does anyone happen to know how I should treat received bank interest for vat?

(I'm sure that in the past we've treated it as a non-vat item but seeds of doubt have been sown!)

Muchos Thanks as ever.

Cheers - PBF

[Smartie]

No VAT!

(and Sage isn't that clever!, generally assumed all bank payments/receipts are t1 unless you overwrite)

[Eric Mc]

Financial charges and interest are exempt for VAT purposes. This cropped up on recent VAT related thread.

In any case, you cannot claim back any Input VAT on a cost without having a relevant VAT invoice. Banks don't tend to issue invoices for interest.

[Pot Bellied Fool]

Excellent - ta muchly.

Thought I was right but you know how it is once doubt creeps up behind you and gives you a slap!

[Red V8]

Smartie said:

No VAT! (and Sage isn't that clever!, generally assumed all bank payments/receipts are t1 unless you overwrite)

Unless you use the 'adjustment' button in Bank Reconcilliation, where it allocates them correctly to T9 (Non Vatable)... don't you just love consistency?