100% Vat on Pre-paid Imports

[scipio]

I pre- pay the supplier in China in dollars and input the sterling amount as a purchase with zero vat.

About 8 weeks later the container docks and HMRC charge Vat at a rate depending on the Dollar to Pound rate ruling at that time and consequently the effective VAT rate is 100% as I pay them but of course with respect to the original amount will be some percentage near to but never exactly 20%.

How can I deal with the VAT to HMRC?

[ian_roberts]

The only real way to enter a 100% VAT invoice in QuickFile is to work out a fake “net” of five times the VAT, then enter a purchase with two lines, one at that amount with 20% VAT and the other for minus the same net but no VAT.

[scipio]

Thanks - works perfectly

[scipio]

Now have a further problem on this topic.

Whilst the above works fine for my imports in the same quarter, I have hit a new problem.

I paid the Chinese supplier in one quarter, the full amount but with no VAT attached. The shipment arrived in the following quarter and at this stage I paid the Vat (which was £58 or so higher than the calculated 20% Vat).

If I use a pre-payment for the monies paid to the Chinese supplier, should I use pre-payment with or without VAT. How will appear on my VAT return if I use the without VAT option? If I use the “with VAT”, the amount will be incorrect and maybe I will be illegally claiming VAT - catch 22? Appreciate any help.

[ian_roberts]

The Chinese supplier didn’t charge you any VAT, so the payment to them is “no VAT”. When you paid the VAT that was to a different “supplier” (your freight forwarder and/or HMRC).

[scipio]

Thanks for the clear answer. May I compliment you on the fast and swift assistance - so much better than Sage!