When PayPal imports sales through its feed it will automatically set VAT at 20%, and this will mean that on your VAT return screen it will show that VAT as payable to HMRC. However what about sales through PayPal that are outside the scope of VAT like items sent to a non EU country. How can I make it so there is no VAT accounted for on the VAT return for these sales. For example I take £1000 through PayPal and £500 was goods to outside the EU so outside the scope of VAT, then how would QF know this? Because as it is all of the £1000 is passing through with 20% VAT on it.
The only way can do this would be to switch the auto-tagging feature off within your PayPal settings, this allows you to manage all the tagging manually from the bank. It’s not possible for the feed to know whether items are EC reverse charge or not so the auto tagging will just make general assumptions.