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Correct settings for Flat Rate VAT and EU Service Sales


#1

Hi I have searched for an answer to my specific question but can’t find one apologies if this a repeat question.

I am newly registered for VAT on the Flat Rate scheme and intend to use cash accounting.
My Quickfile company settings are set this way.

I have a client in Helsinki for whom I provide consultancy services and as such have set them up as registered in another EU country for VAT.
When creating a sales invoice for them I tick the Reverse Charge box and the invoice correctly displays the reversed charges.

Having recorded a payment against the invoice I decided to check the VAT return. It shows 13% (my flat rate) output tax in box 1, Total VAT Due of the same amount in box 3, ZERO in Input Tax box 4 and therefore 13% to be paid to HMRC in box 5.

I obviously don’t wish to pay unnecessary VAT so I played around with the settings.
I can tick Out of Scope on the invoice. However, this prevents the Turnover appearing in box 6 and the EC Sale appearing in box 8.

Eventually, I changed the VAT settings and unchecked the FRS tick box. This then produces a VAT return showing correct turnover and EC sales. With zero input & Output tax just as I would expect.

Does this mean that Quickfile does not support FRS and EC Sales?

Thanks in advance.


#2

Hi @Neltec

EU Services aren’t differentiated within QuickFile, so a manual adjustment would be required whichever way it’s processed. They would be treated as goods rather than a service.

EC Sales as a general however is supported, so this should still work as normal. Although it’s not specifically for the FRS, this post may be of some help:


#3

The “apply reverse charge” box in QuickFile is somewhat misleadingly named, as it doesn’t have anything to do with the actual reverse charge process (which is for supplies of services) but instead applies the rules for dispatches or acquisitions of goods. As far as I can tell from the HMRC guidance (I’m not an accountant) QuickFile is behaving correctly with respect to dispatches of goods:

if your business:

  • sells goods to other Member States of the EU

Then:

  • include this income in your flat rate turnover. If your business has a higher proportion of this type of sale than others in your trade sector you may find that operating the Flat Rate Scheme puts you at a disadvantage compared to your competitors.

But for services:

If your supplies are outside the scope of VAT, leave them out of your flat rate turnover.

This will depend on the place of supply of the services - see VAT Notice 741A Place of supply of services.

(Info from §6.4 of vat notice 733) So when supplying services to a business that belongs in Finland you should say “no vat” and tick the out of scope box, but then adjust box 6 of your VAT return to include the net and submit an ECSL including the relevant entry (which you can’t currently do within QuickFile if you’re not also making dispatches of goods out of the UK). The best write up I can find on this is http://www.brighton-accountants.com/blog/vat-uk-finland/

For services the value should not go in box 8, that’s only for dispatches of goods.


#4

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