Design Details¶
This page contains the design details of VAT Margin Scheme by Codadot. It can help gain you a better understanding of how VAT Margin Scheme alters the posting processes.
Design 1: Original Purchase Price Determination¶
VAT Margin Scheme allows you to calculate the VAT over the profit margin. To do so, we need a reliable way of getting the initial price the item was bought for so the profit can be calculated accordingly.
As you need specific costing to track costs per serial number, VAT Margin Scheme has been designed to use the Value Entries for a specific serial number. To accurately get the costs for a specific serial number, the system looks for the right Item Ledger Entry, to then get the related Value Entries.
The relevant Item Ledger Entry is determined by: - Same Item No. - Same Variant Code - Same Serial No. - Item Ledger Entry should be Open - Item Ledger Entry should have Remaining Quantity > 0
If no Item Ledger Entry could be found, the system will prompt you with an error dialog.
Implications¶
If you adjust the unit cost for the serial number, the profit calculation will not be correct. You should thus refrain from revaluating your margin stock. Revaluation of your stock under the margin scheme is generally a bad idea, as you acquired the second hand goods for that specific price. If you have adjusted the direct costs for a specific serial number, please make sure to manually update the Unit Cost field in the Sales Line.
Design 2: VAT Product Posting Group Overrides¶
VAT Margin Scheme allows you to override the VAT Product Posting Group for a specific serial number. This enables you to sell both second hand and brand new items under the same Item. However, due to how Business Central registers reservations for a specific Serial Number for a specific Sales Line, you'll be interested to know what the implications of how these reservations work along with overrides.
Business Central uses so-called Reservation Entries to make sure every serial number can only be used once in a specific moment in time. This approach allows businesses to be confident about not selling a specific serial number twice, or that a customer receives a specific serial number. Microsoft's design for Reservation Entries/Item Tracking Entries is to decouple it fully from other transactions, which means that other extensions (like ours) can't 'hook' into the results of this serial number selection or reservation.
To overcome this, we've added methods that ensure that every time the standard dialog for selecting serial numbers closes in Business Central, the override for the VAT Product Posting Group is retrieved from the serial number card. Please note the word standard in the previous sentence. If you have an ISV extension or PTE installed in your environment, the override for the VAT Product Posting Group will not be used automatically. It is your responsibility to check the compatibility of this and, if needed, create a connector extension.
Implications¶
If you select a serial number with a VAT Product Posting Group override, you will not be able to enter a quantity other than 1, as the system would otherwise not be able to use the specific direct costs for that serial number.
Design 3: VAT Routine for Margin VAT¶
Upon attaching a Serial Number to a Sales Line that has a VAT posting combination that falls under the margin scheme, the VAT Base Amount in the line will be set to either the profit/loss after deducting the original purchase price as set out in Design 1: Original Purchase Price Determination, or profit/0 depending on which scheme you use (globalization/individualization).
Under the VAT margin scheme, customers pay the same amount regardless of whether the sales prices are including VAT or excluding VAT. This means that the Amount Including VAT and the Amount Excluding VAT will always be equal for that Sales Line. Additionally, on the reports used (e.g. confirmation, invoice, etc.) the VAT Amount will be zero as expected and required for invoices with VAT margin scheme items. If you add regular VAT items to the same sales order or invoice, the VAT Amounts will be correct for both the second hand item (showing VAT = 0) and the regular item (showing VAT = regular VAT). In the resulting G/L Entries and Customer Ledger Entries, the amounts are calculated accordingly, making sure the customer does not pay the VAT calculated.
Upon posting, the VAT entries that are related to the invoice will show the VAT Base Amount being the base amount in the Sales Line, and the VAT Amount will only be the calculation of VAT over this Base Amount instead of calculation over the full Line Amount. Calculating VAT over the Base Amount over the Sales Line is a very different approach to how Business Central standard calculates VAT for Sales Lines and how it recalculates these in different moments during the document process. We've taken the Microsoft approach and modified it in a rather large number of places for margin scheme VAT calculation, but retaining the original approach for non-margin scheme items.