VAT Boxes 2 & 4 incorrect?!

I was about to submit my VAT return via QuickFile when I noticed that a couple of the calculations seemed wrong. I’m not sure if they’re connected - the figure in Box 2 is too low and the one in Box 4 is too high, but by completely different amounts!

Box 2 (VAT due on EC acquisitions):
I pay regular invoices for a few software subscriptions from companies registered in Ireland (Google and Adobe). I have both suppliers listed as “VAT Registered in another EC Member State” and the purchase records for all purchases have “Apply VAT Reverse Charge” ticked. The VAT due for these regular payments usually totals £39.90 for a quarter. For the return I’m trying to do it totals just £3.30. I have gone back over the purchase records, and they all definitely appear to have the “Apply VAT Reverse Charge” ticked. I’ve submitted my two previous returns via QuickFile in the same way, and their totals seem to be fine, so I’m not sure what’s happened this time.

Box 4 (VAT reclaimed on purchases and other inputs):
I have manually added up my total VAT paid on purchases for this quarter, and I make it £46.39 excluding the EC acquisitions, or £86.30 including them. But the figure that’s coming up in Box 4 is £219.69! Despite much head-scratching I cannot work out where that figure comes from.

As far as I can tell I’ve not done anything differently this time around, but I’m clearly getting different results. Can anyone help?

Are you on cash accounting?

On a separate note, software subscriptions are probably services rather than goods for VAT purposes so the vat should go in box 1 rather than box 2. I’ve complained many times on here that QuickFile doesn’t do reverse charge properly - when you tick the “reverse charge” box it always treats it as goods (box 2) rather than reverse charge (box 1) and you need to manually adjust the vat return.

No, I’m on accrual accounting.

I’ll check with my accountant on the services vs goods. I have always put them down in Box 2 (per his recommendation initially I think!) so will see what he says.

Still can’t work out why these don’t add up this time up though…

My reading was that physical software you buy on DVD from a shop is goods but subscription software you buy online and download is services. I guess if you originally bought it on physical media but have a subscription licence then that’s more of a grey area and I’d definitely believe your accountant over some random person on the internet :wink:.

Whenever things don’t add up on a QuickFile VAT return the first thing to do is “download calculations” and open the CSV in excel/google sheets. That shows you exactly what QuickFile thinks should be included in the return - this may include purchases or credit notes that were dated in a previous period but entered after you’d submitted that return and thus have been pulled forward into this one.

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Thanks for your suggestion, @ian_roberts. Downloading the calculations has helped identify what the issues are… to a point! I still can’t solve it all though!! I wonder if @Glenn or anyone can shed any light?

On my downloaded calculations, under the EC section, there’s a column headed ‘VATEXEMPT’ and two of my purchases from one supplier have ‘Yes’ and the rest have ‘No’. I’m not quite sure how I’ve managed to do that; as far as I’m concerned I’ve created each purchase record in the same way.

I tried to replicated it with a new test purchase from the same supplier but haven’t been able to. The supplier is definitely ticked as ‘VAT Registered in another EC Member State’ in their settings, and I ticked ‘Apply VAT Reverse Charge’ on each purchase. But there’s nothing else I can tick to say it’s exempt from VAT (nor should there be, I don’t think, but maybe I’ve done it wrong in the past).

Either way, I think you might be right, @ian_roberts in that these should probably be services rather than products (my accountant isn’t sure!) but I’ve always had such purchases included in Box 2 and now I can’t find a way to do so. Has something changed in the QuickFile system?

I’ve worked out where the Box 4 anomaly was coming from - in May I wrote off an earlier invoice as bad debt after a client didn’t pay up, so the previously paid VAT accounts for the difference here. So at least I’ve got my head around that part!

But the EC part I’m still struggling with, if anyone can help?

I’ve had a couple of instances of that in my returns, in my case I’ve always ticked the so-called “reverse charge” box (i.e. treat as EC acquisition of goods) but for a few invoices the items I’ve been buying are all ones that are zero rated in the UK (we import specialist food items from Germany) so the calculated UK VAT on those purchases is zero. They are listed with “no” in the VATEXEMPT column on my backing report, whereas the ones with non-zero calculated VAT (where it’s a mixture of 0% food items and 20% confectionery) say “yes”.

Purchases you actually mark as “exempt” are omitted completely from the VAT return and backing report by QuickFile (which is arguably the wrong behaviour but that’s a separate question with an ambiguous answer according to the HMRC guidance documents).

OK, let’s assume I’m buying goods from an EC supplier, so I want to make sure I get a ‘yes’ in the ‘VATEXEMPT’ column and therefore have them included in Box 2, how do I go about doing that? Although I’ve done it before it’s not working now and I have tried creating a test purchase but still can’t get it to work! Either I’m missing something obvious that I’ve done before, or there has been a change in the system somewhere.

I would welcome a response from @QuickFile @QFSupport please.

So you’ve got a non-zero value in the vat column but “no” in the exempt column even though you’ve ticked the box on that purchase?

The amount will appear in box 2 providing you don’t mark the invoice with zero % VAT. See the example below.

If you’re still stuck I can open a private message so we can go into specific details.

The problem here is the state of limbo we currently find ourselves in with Brexit. To provide full differentiation between goods and services is a difficult undertaking. The VAT logic is arguable the most complex part of our code base and this will just heap on more complexity. We’re not ruling out this out, but it’s hard to commit to this right now given we have no idea what the situation will be come October 31st.

Regarding the “Reverse Charge” wording however, I do agree and this is something that will be addressed in the next couple of weeks.

That’s correct, yes. On most recent purchase records, but not all!

Yes please, @Glenn, I would appreciate that. The purchases in question have VAT shown at 20%, and have the ‘Reverse Charge’ box ticked. They look just like your example with the VAT amount under the Sub Total, then again below with a negative value and highlighted in red.

I look forward to hearing from you. Thank you.

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