Company is selling services to EU B2B customer, reverse charging the sale (supplies are outside the scope of UK VAT as described in Place of supply of services VAT notice). The net amount should be included in box 6 of the VAT return, but Quickfile does not seem to include this on the VAT return. Could there be an adjustment made for this, so the return would be prepared correctly?
Don’t tick the “out of scope” box as that will exclude the invoice from box 6. This is normally the correct thing to do with OOS sales but overseas services are a bit of a weird special case where they’re technically out of scope but need to be treated as zero rated for the purposes of your VAT return.
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Cheers for the suggestion @ian_roberts, however the out of scope option is not ticked, only the EC Reverse Charge box.
I could just untick the EC Reverse Charge option, and use zero rate VAT, but as the VAT return is prepared on a cash basis, this would not include any unpaid EC sales on the VAT return, but reverse charged transactions have to be reported on an accruals basis as far as I am aware. This used to work well in the past, so I was surprised to see the change this quarter, and was wondering if this could be reversed to how it was before?
I know this is the case for the new “domestic” reverse charge on construction services, but I wasn’t aware it was also the case for sales of services with the place of supply outside the UK (where the customer may have to apply a reverse charge depending on the rules in their jurisdiction).
As far as I remember it was the case for reverse charged supplies received from outside the UK, but guidance on supplies provided is more scarce - I would assume the same applies in this case too.
Indeed. I found it spelled out for EC acquisitions and dispatches of goods pre-brexit - those did have to be treated on accruals basis in all cases (and this is what the old “reverse charge” tickbox in QuickFile used to do, putting the net in box 8 rather than 6) - and for the domestic reverse charge mechanisms, but for overseas sales of services all HMRC say is that “no UK VAT is chargeable where the place of supply is outside the UK”. And that “you or your customer may be liable to account for any VAT due to the tax authorities of that country”, which is unhelpful but it’s all they can say, I suppose, since the detail depends on the law in the customer’s location rather than in the UK.
Ian. Take a look at point 5.2 here as this may help.
That’s the explanation of how to apply the reverse charge when you’re a UK customer buying services from an overseas supplier - the OP question was when they’re the UK supplier (selling services to an overseas customer) and they use cash accounting for their return, do the box 6 entries for overseas sales have to be done on accrual basis (like you have to for for sales subject to a domestic reverse charge) or cash basis (like you would for UK sales at the zero rate).
I believe the time of sale is the earlier of sending the goods abroad or when you get full payment for them.
So in this case it would be when it’s sent, I’m not sure the type of vat scheme is relevant.
Again, we’re asking about services, not goods. Anyway, this is probably far enough down this particular rabbit hole…
OK my mistake.
If the end customer can apply the reverse charge then you mark your invoice as zero rated the same way as anything else zero rated and is added to the vat return in the same way also.
The only difference being that you state on the invoice reverse charge rules apply. And obviously that invoice is declared in the ec sales list.
Again cash accounting or acural doesn’t come in to it. I believe.
Not any more - ECSLs only apply in Northern Ireland now, and only to sales of goods, not services.
Yes of course. Sorry brain stuck in the past!
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