Hello, hope some of the accountants can help. After carefully reading HMRC notices about filling VAT return when reverse charge involved, I am a bit confused.
VAT Notice 735 Paragraph 8.5 says:
“Completion of your VAT return
You must enter the output tax payable on purchases under the reverse charge in box 1, but the VAT exclusive value of the purchases must not be entered in box 6. (THIS IS CONFUSING)
Input tax may be reclaimed, subject to the normal rules, by including it in the total shown in box 4. The VAT exclusive value of the purchases should be entered in box 7 in the normal way.”
Vat Notice 700/12 Paragraph 4.6 says:
Under the reverse charge procedure, the purchaser of the goods or services, rather than the seller, is liable to account for the VAT on the sale. The VAT return should be completed in accordance with the guidance in the following table:
If you use the reverse charge for SERVICES and you are the customer, fill in:
Box 1 (output VAT)
Box 4 (input VAT)
Box 6 (value of the deemed supply)
Box 7 (purchase value)
Vat Notice 741A Paragraph 18.3 says:
How does the reverse charge work?
You simply credit your VAT account with an amount of output tax, calculated on the full value of the supply you have received, and at the same time debit your VAT account with the input tax to which you are entitled, in accordance with the normal rules. The partial exemption implications for reverse charge services are explained in Notice 706 Partial exemption.
You then include in the relevant boxes of your VAT return:
the amount of output tax in box 1 VAT due on sales
the amount of input tax in box 4 VAT reclaimed on purchases
the full value of the supply in box 6 total value of sales, and
the full value of the supply in box 7 total value of purchases.
Also this guidance says - VAT: imports, acquisitions and purchases from abroad
Dealing with the reverse charge
You calculate the amount of VAT (output tax) on the full value of the services supplied to you, and then enter on your VAT Return:
the amount of VAT you calculated in box 1, and if you’re entitled to reclaim the VAT on your purchase of these supplies, also put the same figure in box 4 (this in effect cancels out the figure in box 1)
the full value of the supply in both box 6 and box 7
Is it just me or Notice 735 Paragraph 8.5 is wrong?
Hope someone can share how they are filing VAT return when services were bought from EU and reverse charge applies.
Can anyone confirm that value of services supplied from EU to UK company under reverse charge should be also in BOX 6? So total BOX 1, BOX 4, BOX 6 & BOX 7 should be filled.