I have couple of purchase invoices which should be excluded from VAT claimed from HMRC.
In my case these are purchases made abroad in EU when the seller charged me with local VAT.
As far as I know this is correct as sellers cannot use reversed VAT scheme when the supply of goods is local (so there is no physical good movements to the UK) but I believe there could be some more use cases.
I learned that I can claim this VAT through some cross-border EU procedure (https://www.gov.uk/guidance/vat-refunds-for-uk-businesses-buying-from-other-eu-countries) but it looks too complicated for such incidental and small amounts.
So what I do:
Create a regular purchase using foreign VAT rate. This is to make sure that net amount of the purchase is transferred to Box 7 of VAT Return (“Total value of purchases exc VAT”).
Create a journal for foreign VAT amount:
(2204) Manual Adjustments - CR
(5000) General Purchases - DR
In the VAT Return manual adjustment of Box 4 value (“VAT reclaimed on purchases and other inputs”)
It works, but maybe I’m missing something easier existing already in QuickFile features?
How this is handled for purchases where VAT cannot be reclaimed (e.g. entertainment expenses)?