Google Adwords

Accounting
1

Good Evening,
Please can I ask the QF community if they know how to account for ‘Google Adwords’ invoices post Brexit.

Previously these have been inputted using the EC VAT EXEMPTION (reverse charge) however with ‘Google Adwords’ being a digital service rather than ‘goods’, when inputted into quickfile as a supplier invoice / purchase do they fall under the ‘Vat Exempt’ option or ‘Reverse Charge on Services’

Any help or thoughts would be gratefully received.

Many Thanks

2

Generally what EU was is now under outside EU UK VAT Rules for Goods and Services

3

So what you are suggesting is ‘Reverse Charge VAT’ on services from Google (based in Ireland) to UK VAT Reg businesses? I note that now 'Google’s invoices just show zero vat.

Many Thanks

4

The new “reverse charge on services” option should be the one to use now. Enter the net as what Google charged you, the VAT rate as 20%, and the “reverse charge on services” box will reverse the VAT and account for it on your return by putting the VAT in box 1 and the net in box 6.

There’s actually no change in how you should account for these purchases on your VAT return now compared to last year because there has never been a difference in VAT treatment for services supplied by overseas suppliers purely based on EU vs non-EU. But before this year QuickFile never had a simple way to do the reverse charge properly - the old “EC VAT exemption” setting actually treated the purchase as goods (listing the VAT in box 2 and net in 9) rather than applying the reverse charge rule.

5

Ian, thanks for the guidance.

As we are talking about good and services from EU suppliers, if we are using the postponed VAT payment scheme (new to us!) for goods imported from the EU, does similar apply whereby we tick ‘Postponed VAT Accounting’ and the Vat shows as an in and a out on the purchase invoice.

I know it seems obvious however, what throws me is that our EU supplier/purchase invoices are all zero rated vat and therefore it sort of seems counter intuitive to then calculate VAT.

We are awaiting our C79 to then account for import duty & VAT. Are you aware of any QF support articles on how to account for import duty and import VAT on the return?

Many thanks.

6

Import duty is part of cost, it does not go on vat return. The reverse charge mechanism is not only for reporting purpose but it has implication on non-vat registered businesses and especially on flat rate vat scheme

7

The idea of the reverse charge mechanism and the postponed VAT accounting rules (and within the EU, the rules for dispatches and acquisitions) essentially boil down to

  • supplier does not charge you VAT at their local rate
  • but instead you declare the VAT you would have paid at UK rates if you had bought the same goods or services from a UK VAT-registered supplier

If you’re buying goods worth £100 ex VAT then if you were buying from a UK supplier you’d pay £120 to the supplier and then later claim £20 back from HMRC on your next VAT return (unless you’re on flat rate or partially exempt etc.). Ignoring customs duty for a moment, if you bought the same goods worth the same amount from an overseas supplier then you would pay £100 to the overseas supplier and £20 in VAT to HMRC, and then claim the £20 back on your VAT return.

Postponed VAT accounting means that rather than paying the £20 up front to HMRC at the border you instead “pay” it by adding an extra £20 to box 1 on your next VAT return. The reverse charge does the same thing for services (where there’s no physical “border crossing” involved).

The point of all this “pay and claim back” dance is as FarayKeynes hints, to level the playing field between UK and non-UK suppliers - it makes a difference if you’re in a situation where you can’t reclaim all your input VAT. Say you were on flat rate VAT - if you didn’t do the reverse charge then your £100 purchase would “cost you” £120 from a UK supplier but only £100 if the supplier is overseas.

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8

Hi Ian,

So based on your advice I have just been playing around with an un-paid EU supplier Invoices to see what implications various settings have on the VAT return.

Just for reference my supplier invoices are in Euro’s however I input them into QF as sterling based on the exact exchange rate at the point in which I pay the invoice. I have previously played around with entering them into QF as a Euro invoice. (we only input 4 to 5 EU consignment a year, they are low value and I tend to pay the invoice 7 days after receiving the goods).

That aside, where I still have a degree of confusion / uncertainty (stick with me here Ian) is OK so if the EU supplier/purchase invoice doesn’t include/show VAT, when I input into QF as a purchase and tick ’ Postponed accounting rules for imported goods’, should I keep the VAT rate at 20% or 0%, with the observation being that if set at 0% obviously box 1 on the return doesn’t then contain the VAT element of that purchase.

I am openly admitting that I have confused myself and thus a voice of reason and clarity would be most appreciated.

Many Thanks

9

20%1. The rule is always that you use the same rate that you would have been charged by a UK-based VAT registered supplier who was selling you the same thing.

1 unless of course it’s a good or service that would have been zero rated if sold in the UK, such as food or children’s clothing

1 Like
10

I think I have just answered my own question, having looked at Box 4, whereby if the Purchase invoice is set at 20% and the Postponed accounting rules for imported goods is applied then it looks like the vat is deducted at source in effect. So just to clarify I still record the VAT at 20% not 0%

11

20% or 0% lol??? Help!

12

Basically you imagine you are both the supplier and the purchaser at the same time. If you would charge someone else 20% VAT when selling the same thing to them, then you “charge yourself” 20% VAT on the reverse charge/postponed accounting entry.

This is literally how I used to handle reverse charge purchases back before QuickFile had native support:

13

OK Ian, so I think I am about there on goods.
So just for clarity, going back to google and digital services provided to us, are these at 20% or 0%, I would assume 0% as they are a service that I am benefiting from not something I am selling a supplier?

14

The rule is exactly the same for RC services as it is for postponed goods - use the same rate of VAT that you would expect to be charged by a UK supplier if you bought the same services from them. And advertising services in the UK are standard rated for VAT (20%) unless the customer is a registered charity.

1 Like
15

Thanks Ian Really appreciate the help

16

Hi Ian,
Thank you so much for your detailed explanation and your patience. I am in the same situation as Andy and followed your conversation very intently. Your help is very appreciated.
Thanks again

17

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