Hi Sue. 

The way you process and calculate the VAT and post the journals in Sage will remain the same.

The MTD update will just allow you to submit the VAT return through the program once the new Making Tax Digital changes come in to affect from April 2019. 

I am unable to claim a great deal of our VAT as we are a charity. I use the figures from Sage & then calculate the adjustments in Excel. I then manually input these into the HMRC website and manually input the journal in Sage. I cannot input the journal as Sage prepares it as the figures are wrong, so I'm still not sure how it will work for MTD. We have exempt supplies and non-recoverable VAT. When I did the MTD webinar, I was told Sage were working on a solution.

Hi Sue. I submitted a charity VAT return through Sage today. On the VAT return screen (after calculating the standard return) there is a button for Adjustments. Edit the field for VAT on purchases and key in the amount that is not recoverable as a negative. Do the same for total sales (to remove the non-business income). This will cause Sage to recalculate the values on the return so that the automated submission uses your adjusted figures. When you set the reconciliation flags, a journal is created, posting the irrecoverable amount to the nominal code Manual Adjustments. You then need to journal that to a P&L account for Irrecoverable VAT.

Hi Anita,
Thanks for your reply. That is very helpful.
Sue