I have all my suppliers in Poland. Additionally I have invoices from Amazon Etsy and Ebay (they are registered in Ireland or Luxembourg) As I have registered for VAT on 1st May, should I update all my suppliers to VAT Registered in another EC Member State? and should I use EC reverse charge on each purchase invoice? Regards
Normally you would need to supply your VAT registration number to your supplier and they were mark the invoice as reverse charged. Until that point, they should charge VAT to you as normal.
If they have a VAT number, recording it in your supplier records would be correct.
As always with any types of tax, I recommend just running it past your accountant to be sure it’s all correct.
I gave my supplier my Vat Number and they prepared for my 0Vat Invoice. So I should record purchase like:?
Before I did not know about"EC reverse charge". I thought it is OK just to record 0Vat purchase.
Normally an invoice would be issued with a message such as “VAT reverse charge applies.”, although this isn’t always the case. If you’ve supplied your VAT number to your supplier, then it’s likely they’re reverse charging the VAT.
Where it is reverse charged, the above should be correct. There’s also a guide which highlights this, here which may help in future too
What about if they do not do “reverse charging”. Should I record purchase like this?
I am a bit confused with it I thought it is correct just record purchase without Vat.
You should record the invoice as they’ve supplied it. Usually if it’s not reverse charged, VAT will be shown. However, non-UK VAT cannot be reclaimed so gross figures should be used.
Again, this is something I would run past your accountant if you’re not sure so at least you know it’s correct.
It doesn’t help that the terminology used by QuickFile in this situation doesn’t line up with the terminology used by HMRC. Purchases of goods from an EU supplier are treated differently on your VAT return from purchases of services. Technically the term “reverse charge” only applies to services, not goods, but when you tick the reverse charge box in QuickFile it records the purchase using the rules for goods, not services…
When you buy goods from an EU supplier and give them your VAT number, they will invoice you without charging their local VAT, and there will be some indication on the invoice that it is a zero-rated “intra-community supply” (e.g. on my invoices from a supplier in Germany there’s a footer saying “Innergemeinschaftliche Lieferungen sind laut §6a UStG steuerfrei”). When you receive such an invoice you have to account for what is called “acquisition tax”, which is the same amount as the VAT you would have been charged if this purchase had been from a supplier in the UK.
This acquisition tax goes in box 2 on your VAT return and the net value goes in box 9. And then you can usually claim the same amount back as input tax in box 4 (with the net in box 7) so the overall result would be zero.
In QuickFile you tick the “reverse charge” box, then enter the items on your supplier’s invoice with the appropriate UK VAT rate for each item (if they’re all the same rate you can probably get away with just entering one line for the total, in my case it’s a mixture of food - UK zero rate - and confectionery - UK 20% - so I enter each line individually to be sure). QuickFile will record the “VAT” as acquisition tax in box 2 and input in box 4 and everything works out fine.
If the supplier didn’t take your UK VAT number and zero-rate the supply then they will have charged you their local rate of VAT and this is not something you can claim back on a UK VAT return. So in that case you’d enter the total amount (including the overseas tax) as the “net” and set it to “no VAT”.
If you buy services from an overseas supplier their invoice will state something like “reverse charge applies”. This means the actual reverse charge mechanism, where you treat it on your VAT return as if you are both the supplier and the purchaser. The effect of a reverse charge on a service is the same as for acquisition tax on goods, you have to apply the appropriate UK VAT rate and then immediately claim it back, but in the reverse charge case the VAT has to go in the usual box 1 (it’s treated as part of your sales), not box 2, and the net in box 6, not box 9. If you tick the “reverse charge” box in QuickFile for a purchase of services where the reverse charge applies then you need to manually adjust the VAT return to move the VAT from box 2 to 1 and the net from 9 to 6.
As always, I am not an accountant, this is just my understanding from dealing with my own purchases of both goods from Germany and services (Stripe fees in my case) from Ireland. Always check with your own accountant if you want a professional opinion specific to your own circumstances.
Hi Ian. Thank you.
I give you my example:
All invoices from Poland
- Invoice for goods for resale in UK 0% Vat (in UK 20%)
- Invoice for goods for resale in UK 0% Vat (in UK 0%- kids products)
- Service (carriage) from Poland 0% Vat (in UK 20%)
- Invoice for goods NOT for resale in UK 0% Vat (in UK 20%)
If I good understood, to register in QuickFile, for all of them I have to “Apply VAT Reverse Charge” and set VAT rate to 20% except position 2 where I set No VAT.
I think this is quiet clean example so it is correct to do this way?
That sounds right to me - tick the reverse charge box in all the “goods” cases (including the items that are zero rated in the uk) to ensure the net value is recorded in box 9. For case 2 set the VAT rate to zero even though the box is ticked.
For item 3 it’s a service rather than goods, so the invoice from the supplier should state somewhere that the reverse charge applies (or the equivalent in Polish). So I’d still tick the “reverse charge” box in QuickFile but then also adjust the VAT return to move the VAT from box 2 to 1 and the net from box 9 to 6 (to turn it from an acquisition of goods to a proper reverse charge transaction). This doesn’t affect the total VAT in box 4, it just moves things to the right place on your return.
How can I do it in quick file. there is no option to adjust this service vat in Quickfile Vat return
And it should not be net from 9 to 7 rather?
There’s no automatic way, you need to use the little red triangle drop downs on the VAT return boxes and enter manual adjustments - negative to boxes 2 and 9 and positive to boxes 1 and 6.
No - the value will already be in box 7 as a purchase on which you are reclaiming the VAT. Box 9 is the value of acquisitions on which you owe acquisition tax to HMRC, the equivalent for reverse charge services transactions is box 6 as it’s treated as part of your sales.
In the goods case the values in 7 and 9 cancel out, in the services case it’s the values in 7 and 6.
Thank you very much Ian. I can see you have similar situation like me so there is big possibility that I come back to you for more answers:)
I have one question more. Should I treat all my Hermes or Royal mail invoices the same way like carriage from Poland - to move from 2 to 1 and 9 to 6?
You only reverse charge invoices that state that they are supposed to be reverse charged. If it’s an invoice from a UK supplier like Hermes or RM for postage within the UK then it’s a normal UK purchase and you will have a VAT invoice from the supplier in the normal way (except some Royal Mail services are VAT exempt).
Hi Ian ,
From time to time I invoice EU companies for my services whilst they are working in UK.
I invoice them under the "Reverse Charge Art 44 Council directive 2006/112. I then get their Home country VAT number which I put on the invoice and don’t harge them VAT . I also cmpete the additional Vat return entering their Vat number .
What happens now after 1st january , ,will the same rules apply ?
This post from my colleague earlier today may be of interest: VAT Updates - January 2021
This topic was automatically closed after 3 days. New replies are no longer allowed.