I pay a monthly subscription to Adobe for software. The invoice is generated by Adobe Systems Software Ireland Ltd, states that it is a reverse charge supply, is VAT rated at 0%, includes both my VAT Reg number and theirs and states that the VAT needs to be self assessed.
So I have worked out that I can check the ’ VAT Registered in another EC Member State’ box. I assume that I enter the default VAT rate for Ireland of 23%, which says that this will be the VAT rate that automatically appears on any new purchases. But when I come to enter the invoice details into Quickfile, the only VAT options are 20%, 5% or 0. The VAT amount box defaults to 0. Am I doing this correctly? Will this entry be correctly included in my VAT return?
The way reverse charging works you account for the VAT as if you were the supplier as well as the purchaser, so you “charge yourself” the VAT rate that would apply to the service if it were being sold by a UK supplier, i.e. 20%. The rules for reverse charge services are that you declare the VAT in box 1 and the net amount in box 6 along with your sales, and then you would normally simultaneously reclaim the purchase VAT back using boxes 3 and 7 in the usual way, so the net result is zero.
The complicating factor is that the box that is labelled “apply VAT reverse charge” in QuickFile doesn’t actually apply the reverse charge rules. It does nearly the same thing but it uses the rules for buying goods from an EU supplier, not reverse charging services. Under the goods acquisition rules the VAT goes into box 2 on your return and the net into box 9, so you will need to make a manual adjustment to your VAT return to account for it correctly.
The way I deal with a similar situation in my QuickFile (in my case Stripe payment charges) is:
- Tick the “VAT registered in another EC member state” box for the supplier
- Create the purchase invoice with the net amount they charged me and set it to the 20% UK VAT rate
- Tick the “apply VAT reverse charge” box on the purchase invoice
Now when I come to do my VAT return QuickFile will put the VAT from this invoice into box 2 and the net into box 9 as if it were an acquisition of goods, so I use the little drop down arrows to make manual adjustments to subtract the VAT from box 2 and add it to box 1, and subtract the net from box 9 and add it to box 6. This has no effect on the overall amount of VAT due to HMRC (since that is calculated as box 1 plus 2 minus 3).
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