I have just noticed that one of my suppliers is registered in an EU County but I did not acknowledge this in my last VAT return submitted to HMRC. I believe I should have entered VAT for services acquired in a different way?
Any help of suggested way forward? My next VAT return is due shortly?
How did you enter it last time around? Did the supplier know you are VAT registered in order to invoice you without their local VAT applied, or did they treat you as a consumer and charge their local rate of VAT?
The company is hosting my website, and they have charged me VAT at 20 percent and listed their VAT ID number on their invoice.
Are they VAT registered in the UK (is “their VAT ID” a GB one) or elsewhere? I know the likes of Amazon are VAT registered in several different countries, and charge their UK customers UK VAT, French customers French TVA, etc.
If they’ve charged you UK VAT then it’s a normal UK purchase and you shouldn’t have to do anything special on your return. If the 20% they’ve charged you is VAT from another country then you can’t reclaim it on a UK return at all (and I believe you just enter the gross total as “net” in QuickFile with “no VAT”). It’s only in the case where the supplier has invoiced you without any VAT at all (UK or otherwise) that you need to do the reverse charge procedure.
Purchase of Goods from EU business (VAT registered)
To be considered as a business transaction, you must supply your VAT number to the seller and they must be VAT registered in their country.
VAT on purchase of EU goods is charged as if you had bought the goods in the UK from a UK supplier. This means it is charged at the UK rate of 20% in sterling. HMRC publishes an exchange rateif you need to make a calculation, or you can use the published daily rate.
You might think this is strange, that you are getting to claim 20% VAT when the seller has to charge 0%. That doesn’t seem fair. But just wait and see. The 20% VAT also goes into Box 2 on the VAT return for EC acquisitions. Box 2 contributes toward the sales (input VAT total). Overall the net effect is zero VAT as the VAT on the purchases side of the calculation is cancelled out by the same VAT amount on the sales side. So in the end, after all those complications, it is fair because you come out the same as the seller with zero VAT impact overall from the transaction.
@KUBE if we were talking about goods then yes, but this example is services (web hosting).
There’s a third possibility as to why they’ve charged you 20% VAT - web hosting falls under the VAT MOSS scheme so they may be VAT registered elsewhere but charge the UK rate of VAT on sales to consumers in the UK. I’m not sure whether it’s possible to reclaim VAT you’ve been charged in this way, because B2B sales aren’t supposed to go through MOSS, they’re supposed to be invoiced at zero rate and the purchaser uses the reverse charge procedure (similar to but not quite the same as the goods procedure explained by @KUBE).
Ian, you’re absolutely correct this is for EU VAT on goods.
Purchase of Services from EU business (VAT registered)
If you are buying services from the EU then the place of supply for the services is where you are based as the customer. No matter which EU country the service is supplied from, it falls under UK VAT and you are responsible for charging and accounting for the VAT, not the supplier.
This is done using the reverse charge. The reverse charge sounds quite complex because the transaction is treated in the VAT return as if it were both a sale and a purchase. It is as if you were selling the service to yourself. You include the item in the purchases total and the VAT on purchases total as usual, but you also include it in the sales total and the VAT on sales total as well. Overall the net effect will be zero VAT, unless you can’t include all of your purchases e.g. you are partially exempt.
The supplier should have provided on invoice without any VAT. You enter the net amount that you paid then add 20% VAT on top. This VAT amount is included in the output (sales) total and in the input (purchases) total so overall there is no effect on the VAT due.
And to make things doubly confusing the checkbox labelled “apply reverse charge” in QuickFile uses the goods rules rather than the reverse charge ones - to actually apply the reverse charge requires an adjustment to your VAT return to move the vat from box 2 to 1 and the net from box 9 to 6.
I’m grateful for the replies and I’m sure you’re trying to be helpful but none of this makes sense to me and you might as well be speaking in a different language!
Having already treated the transaction as though the VAT paid
was from a UK business and realising after the event that their invoice number is prefixed with EU, I’m not sure what action I should take, if any to rectify the matter?
If they have a VAT number prefixed “EU” then that means they’re a non-EU supplier of electronic services that charges consumers in the EU at their respective local rates of VAT using the “MOSS” scheme. Although this VAT has been charged at the UK rate it is not UK VAT and you can’t reclaim it on your VAT return.
MOSS only applies to consumer sales, not business-to-business. If you are VAT registered then you need to provide your VAT number to the supplier, and they will be able to invoice you without charging you any VAT at all. You pay the supplier without VAT, but you have to make a special “reverse charge” declaration on your VAT return.
For this particular invoice, if you can’t get the supplier to retrospectively change it from a consumer sale (MOSS VAT) to a business one (zero VAT, reverse charge) then I’m afraid all you can do is enter it in QuickFile with the total purchase value in the net column including the non-reclaimable VAT, and the VAT rate set as “no VAT”. For future purchases from the same supplier you need to tell them you’re a business and get them to invoice you without VAT in future. If you have any kind of online account or “control panel” type thing for the supplier then there will probably be an option somewhere in your account settings to give them your VAT number, or just email them and ask for advice.
If you mean you’ve already submitted a VAT return where you mistakenly claimed back the VAT on this purchase then you should probably credit note the original purchase (that you recorded at 20% VAT) and then create another purchase at no VAT as I described above. This will reduce your box 4 claim for this quarter by the amount you over-claimed last time. As long as the difference is under £10,000 then that should be all there is to it (https://www.gov.uk/vat-corrections).