Question asked by Pete 8 years ago
I am on FRS for VAT. My invoices to and from US companies is showing VAT in box 1 and box 4 with FRS rate of 20%. They cancel each other out, however I don't understand why they are there as the VAT rate is 0% being outside EU.
I do have reverse charge toggle on, but i thought this only applies to EU. Am I doing something wrong?
Thanks
Hi Pete
The reverse charge rules apply to purchases of "overseas" services, ie whether from inside or outside the EU, and so a purchase of a US service will spark this.
Best answerHi Pete,
Would you mind raising this as a ticket by emailing contact support? That way we can take a look in your account and see what is going on.
If you have more than one account please let us know which one you are working in.
It would also be useful if you could let us know which VAT return you are looking at and the numbers of some of the invoices in question.
I look forward to hearing from you.
All the best.
Thanks Richard. Will do
I did mention this to someone at support and was told it is normal. Maybe there was some confusion over EU/non EU invoices.
Hi Pete
The reverse charge rules apply to purchases of "overseas" services, ie whether from inside or outside the EU, and so a purchase of a US service will spark this.
Best answerThanks Paul. What confused me is that me previous bookkeeper (using Sage I think) did not do this, ie just kept any overseas invoices out of box 1 and 4.
Obviously it comes to the same figure of VAT payable for FRS, but this is why I questoned it when Clearbooks (correctly I see now) would enter the reverse charge in 1 and 4.
Your welcome - you mentioned the "S" word but I think you got away with it!
" you mentioned the "S" word but I think you got away with it!"
Well, I sacked her :)
OK, one more thing I don't understand now is why all those output invoices are also going into box 6 total, although it appears they don't get included when my FR of 11% is calculated.
This seems very odd as during my previous HMRC investigation, the (very helpful) investigator told me that one reason the started the investigation is because box 1 was not 11% of box 6, so they assumed something was wrong.
Hi again Pete - With regard to HMRC's abilities, I can only refer you to Kevin Doran's comment, on your VAT MOSS question :)
The reverse charge rules are part of the FRS rules, in other words, your return has to be a mix of standard rules VAT (for the RC rules) and FRS rules. So box 6 shows the FRS turnover plus RC. Similarly, you wouldn't normally have anything in box 4 (under FRS rules) but must include the RC VAT. That alone might have indicated to HMRC that you had RC entries.
Have a look at section 4.1 of this VAT notice: https://www.gov.uk/government/publications/vat-notice-70012-filling-in-your-vat-return/vat-notice-70012-filling-in-your-vat-return#section4
You must 