Registered for VAT MOSS but under UK threshold

Hi Pete - I'm not sure I understand the problem.

You are entitled to reclaim the VAT on expenses directly related to your MOSS income and so you do this, as you describe above by showing VAT on the bills and expenses, and processing it via the UK VAT return.

Any other non-MOSS related expenditure is outside the scope, as far as you are concerned, and so you record it as such.

CB is not able to make this automatic as it has no way of knowing whether the expenses & costs you're recording relate to your VAT MOSS income or not. Plus many businesses have to split some expenses if they relate to both MOSS & non-MOSS business.

There is however quite a bit of automation in defaulting a cost to VATable & NON-VATable as they are entered so, for example, you can mark certain suppliers to default to standard VAT or outside scope as you can with bank import rules, if you are entering expenditure directly from bank statement imports.

Does that help?

Well, that would be nice, but i was told by HMRC that I cannot reclaim any VAT on UK input bills, as I am effectively registered for VAT MOSS but under UK threshold, therefore cannot reclaim VAT on UK purchases, only EU.

Here you go: https://www.gov.uk/guidance/register-and-use-the-vat-mini-one-stop-shop#how-to-reclaim-vat-on-business-expenses-and-purchases

Agree with Paul, HMRC are wrong. In fact, HMRC are quite often wrong.

Thanks, that's good to know. I think all my UK input invoices are related to non VAT MOSS trading.

I think I get it now. So in this case am I right in saying I just choose "out of scope", even though they are invoices showing VAT charged? And is it better for me to void and recreate those input invoices as opposed to journalling them out?

BUT, there is one invoice that I think is relevant to both VAT MOSS and non VAT MOSS, and that would be my payment to Clearbooks.

So, for example, 10% of my turnover is VAT MOSS related, according to the HMRC page you kindly linked to Paul, I can therefore reclaim 10% of the 20% VAT on that invoice.

So my new question is, toI do that in Clearbooks would I just choose manual from the VAt treatment dropdown 9when explaining from bank statement)

Hi Pete

Hi Pete, any non-VAT registered business shouldn't record the VAT on expenditure, although CB allows you to.

Yes, you could use the manual option to show the actual MOSS VAT on any bill/payment but, strictly, I think that would make the Box 7 net payment incorrect on the return and so the alternative is to have two lines per bank payment or bill, per the screenshot:

Yes that seems a lot tidier.

Looks like I will now need to go back over 6 months and void and redo some invoices.

One more question:

I just noticed I have a lot of input invoices that are 0% VAT. Those from outside EU are showing on my Clearbooks VAT report as reverse charged, ie the amounts show in box 3 and box 4 but cancel each other out.

As the advice I got from HMRC was to just put 0 in every box of the VAT return as I am registerd for MOSS but under UK threshold, that is what I did.

I assume all those bills should also have gone into Clearbooks as "out of scope" (as mentioned above) but does it really matter if I just leave them as it is? It just means my historical Clearbooks returns would show those cancelling out figures, but the actual returns I made were 0 so it doesn't affect any payments or reclaiming of VAT. Nor does it affect my balance sheet or P & L.

Hi Pete - this is actually the same as all the other UK VAT stuff. If the expenses relate to the MOSS business you put 0% and use the EC reverse charge treatment, otherwise you use outside scope, which puts 0 in all the boxes.

So yes, even though it makes no difference to your VAT charge, the boxes do make a difference to HMRC so best get them right.

Cheers Paul

However what I was told by HMRC was to just put 0. Which is what I did (I realise of course from answer above I could claim any MOSS related expenses but there aren't any worth bothering with)

I realise that going forward I should just put everything as out of scope. What has happened is my Clearbooks VAT reports show the reverse charge, but i didn't put them on the return, I just put 0.

Sp my question is whether this is actually an issue, e.g. if I am investigated. It will be a big pain to go back and void all those 0% invoices and redo them as out of scope.

Thanks, that's great, didn't know about the toggle feature - I'll look into that. And yes, in the future I'll make sure it's done correctly.

I didn't think they'd kick up a fuss as long as it's not a fiddle. I had an HMRC audit last year and they were very nice, only bothered with underpayments and were accepting of minor bookkeeping errors.

In the end , they ended up owing me nearly £2000 (most which I couldn't recover) due to a major bookkeeper error, hence I sacked the bookkeeper and moved to Clearbooks to do it myself.

I've got a bit of a thing about Toggles, they can solve a number of mysteries!

Yes, I always tell my clients not to worry about VAT visits, they are there to help. Mind you this didn't apply to one on my own books a few years back when I made the mistake, at 11am, of asking her if she had time for another coffee. She did, along with lunch & tea!