Still trying to get my first MTD VAT report sorted with QF.
We are on cash accounting for VAT. All our sales are services, not goods.
HMRC clearly state in their guidelines: Enter the value of all your sales, excluding VAT, for the period based on the payments you’ve had, not the invoices issued
However, QF is including invoices issued, but which have not yet been paid, prior to the VAT period end for invoices issued to other EU member states (not UK customers).
If I deduct these invoice amounts from box 6, presumably I then have to make a note to add them back in for the next VAT return. This seems a bit strange and certainly not in the spirit of MTD.
Bank charges are exempt from VAT, however if I mark them as exempt, they don’t appear in box 6 so presumably I should not mark them as exempt, just leave them as 0% VAT? Also, does anyone know if PayPal fees are the same? I know that there is no VAT charged on PayPal fees but are they exempt or After extensive searching I can’t find anything to confirm or refute this. PayPal doesn’t appear to issue invoices for their fees like Stripe does and I can’t even find an address on the PayPal website so no idea if they are charging me from the UK, EU or other country. Their only reference to tax is for the USA.
How are you doing the invoices to foreign customers? If they were goods then I believe the amounts should be included in box 6 on accruals basis (because box 8 has to be done on accruals basis even if you’re otherwise on cash accounting, and the relevant VAT notice says you have to add the box 8 total to box 6), but it seems less clear for services.
I know on the purchases side when you set up a supplier as registered in another EU member state and tick the box labelled “apply reverse charge” it actually treats it as a goods transaction rather than a reverse charge, so I wouldn’t be surprised if it’s the same for the sales side.
It may be simpler not to tick that box and instead just treat the invoice as a zero-rated sale and include a statement in the notes section that the reverse charge procedure applies - this is how all the reverse-chargeable invoices I’ve received from other suppliers look, they don’t do the QuickFile thing of adding the VAT and then taking it away again, they simply say zero VAT and “reverse charge applies”. However I’m not an accountant so it may be worth asking yours for a second opinion.
Thanks Ian. Yes, I am doing the invoices (in QF) with the reverse charge on as that is what I thought I was supposed to do. We don’t send out QF invoices though so I can change QF if necessary. The invoices we receive from other EU countries do as you state - 0% VAT and then a statement about reverse charge (which is how our invoices to customers are sent too). It seems like another QF thing which needs to be ignored then. How very frustrating.
The VAT instructions I am referring to are specific for cash accounting and it clearly states that there are special rules for completing boxes 1, 4, 6 & 7, with all other boxes being completed as normal. It is very clear that box 6 should be the payments received, not invoices issued and it does specify all your sales.
It does indeed, however the same subsection (box 6 in the cash accounting section) also says “also include in box 6 any amount you’ve entered in box 8”, and box 8 is definitely supposed to be calculated on accrual, not cash basis. This would suggest that all dispatches (the official term for zero-rated sales of goods to other EU countries) should be included on accruals basis, and it seems to be these dispatch rules that QuickFile applies when you tick “apply reverse charge”.
There is no such thing as “reverse charge for goods” and I wish QuickFile wouldn’t use that terminology as it’s at odds with all the guidance from HMRC (when talking about international transactions “reverse charge” only ever applies to services, though there are “domestic reverse charge” schemes for certain goods transactions within the UK).
No idea about PayPal I’m afraid, I only ever use them to send payments, not to receive them.
Hi Ian, thanks again for all your help with this. I have now amended all of the EU invoices to remove the reverse charge tick box and change the VAT to 0%, however, the system then goes back and re-ticks the reverse charge box meaning that the sale is then reported on accrual basis as before. It seems that to get it to not report on the accrual basis then I have to remove the VAT Registered in another EC Member State tick box from the client details, which is clearly wrong. In addition, I am assuming that when I come to do the EC sales list, invoices won’t be reported unless the client is ticked as VAT Registered in another EC Member State
Is there any guidance available from the QF team (@QFMathew, @QFBeth)?
Forget this - I have just read that I can’t use QF to file the EC sales list anyway as the quarters differ from the VAT quarters so I will have to continue to do it manually anyway.