VAT Return

Question asked by Michelle Underwood 8 years ago

Just wondering if anyone can help - this quarter I have two purchases from outside the EU, so I have set the treatment as "services outside the EU" but when I run the VAT return Clearbooks have popped the two invoices at the bottom of my sales invoices and included the 20% VAT that isn't applicatble as they are outside the EU. It's almost as though it has applied the reverse charge to them. I hope that make sense but any help would be greatly appreciated. Thanks

9 Replies

Hi Michelle - it's a common misconception that RC only applies to services from the EU, ie it's for any services bought from "overseas" . I apologise in that I thought the link John provided was to the VAT notice 741A, which gives more detail of place of supply & reverse charge. Here is a link to the notice and section 5, with section 6 deals with "place of supplies" and the general B2B rule.

https://www.gov.uk/government/publications/vat-notice-741a-place-of-supply-of-services/vat-notice-741a-place-of-supply-of-services#reverse-charge

As I say, in the majority of cases, it no longer matters where abroad the physical work is undertaken to provide the service, the deemed place of supply is the UK. The rules are different with "goods" but, as a service, I'd say this falls within the general rule.

Up to you & your accountant through, whether RC or outside the scope, there's no VAT consequences to your bank account but HMRC do still regard the RC process as important.

Hi Michelle,

The reverse charge is indeed being applied to these bills - it should show in box 1 and 4, the difference being 0 in box 5.

Thank you, but what if i don;t want the reverse charge applied? Is there any way to stop this? Thanks

No sorry - the VAT treatment triggers the reverse charge and the rule is applied as per HMRC guidelines. Is there a reason you don't want this applied? I can consult our support accountant if needed.

I want the total figure to be in box 7 of my VAT return as advised by our accountant, the system should really only reverse charge it if requested. It is causing a but of problem for our accountant as the details on our HMRC Vat return will differ from our one clearbooks generates. If I zero rate the the invoice you reverse charge it but if I put it as "outside the scope" then it is excluded from the return all together. I'm very confused as to what to do for the best??

Hi there, We still believe that the invoice in question should not be subject to the reverse charge as per the guidelines - It only applies where services are supplied in the UK by a supplier belonging overseas. This makes it outside of the scope. However, I still need it to appear in box 7 as it is an 'Out of the scope' of VAT purchase that is considered as a SUPPLY to the business. Is there any way clear books can do this or am I going to have to produce the VAT return manually? Thanks

Hi Michelle - in this particular topic, the link John has provided above is not a guide, it states the law.

The general rule is that, in cross border "business to business" transactions the place of supply is where the purchaser belongs and so if you, as the purchaser, belong in the UK, the supply is deemed to have taken place within the scope of UK VAT and the reverse charge process kicks in, with the purchaser recording both the sale (boxes 1 & 6) and purchase (boxes 4 & 7).

As stated in section 5 of the guide: "The reverse charge applies to almost all B2B supplies of services except exempt supplies" but if you, or your accountant, believe that a specific exemption can be applied to this general rule, then you need to find it in the legislation and, as you suggest, just record it as a general input in box 7 of your VAT return (use UK purchase with 0% VAT).

Hi Paul, Many thanks for your response. My apologies regarding the incorrect wording of the VAT notice. The invoice that is causing us the issue is from a supplier in the UAE where the service is for “management system documentation development”. Our accountant believes, based on VAT notice posted, that because the supply of service has taken place in the UAE then it is not subject to the reverse charge. Again thank you, this one has caused us a great deal of headaches as we have never dealt with the reverse charge outside the EU.

Hi Michelle - it's a common misconception that RC only applies to services from the EU, ie it's for any services bought from "overseas" . I apologise in that I thought the link John provided was to the VAT notice 741A, which gives more detail of place of supply & reverse charge. Here is a link to the notice and section 5, with section 6 deals with "place of supplies" and the general B2B rule.

https://www.gov.uk/government/publications/vat-notice-741a-place-of-supply-of-services/vat-notice-741a-place-of-supply-of-services#reverse-charge

As I say, in the majority of cases, it no longer matters where abroad the physical work is undertaken to provide the service, the deemed place of supply is the UK. The rules are different with "goods" but, as a service, I'd say this falls within the general rule.

Up to you & your accountant through, whether RC or outside the scope, there's no VAT consequences to your bank account but HMRC do still regard the RC process as important.

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