I noticed a change in the standard format for sales invoices where EU reverse charging rules apply.
I raised an invoice in April that shows:
Sub total £x.xx
EC VAT EXEMPTION £0.00
Total £x.xx
The May invoice format (same customer, EU reverse charge still applies) is:
Sub total £x.xx
VAT (20.00%) £y.yy
EC VAT EXEMPTION £y.yy
Total £x.xx
£y.yy is VAT at 20% on the sub-total.
A couple of points. Firstly, the presentation is a bit misleading as the VAT and VAT exemption are both showing as positive amounts, but the logic of the total is that the VAT exemption is a negative amount, cancelling out the VAT, to make the Total equal the Sub total. Appreciate this is a minor point, but it is initially a bit confusing.
Second point, more important, is why the change in format?
My client is being difficult and asking that no VAT is shown on the invoice if the reverse charge applies. Obviously, this is despite the invoice showing the VAT being included then removed under the exemption and the message “No UK VAT - Reverse Charge Applicable” clearly stated on the invoice. If it’s an HMRC compliance requirement that has caused the change, no worries, can explain that to the client. If not, any chance the old format can be made available as an option?
I think I may have resolved this one. I couldn’t see any differences on the face of each invoice, so I tried with a new draft invoice.
If the VAT rate is set to zero, then the format looks like the first invoice. If the VAT is charged at 20% while preparing the invoice, then it’s added to and then subtracted from the subtotal on the face of the printed invoice.
My client seems to want no mention of the VAT on the face of the invoice, so I’ll go with that approach
This is another one of those cases where it’s horribly confusing because QuickFile uses the terminology “reverse charge” on the tickbox but if you tick it then it doesn’t actually apply the reverse charge rules, it applies the rules for dispatches and acquisitions of goods (which on the sales side includes putting the invoice value in box 8 on your VAT return - you only do this for supplies of goods, not services).
If you do actually want to issue an invoice for services where the reverse charge rules apply then you should probably just issue it as a normal zero rated sale and put the sentence about reverse charge into the payment terms box. You’ll also have to mention it on your EC sales list, and you might have to submit that outside of QuickFile if you’re only supplying services as QuickFile doesn’t offer the ECSL option unless you have a value in box 8.