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VAT Updates - January 2021

With the end of the Brexit transition agreement we have introduced a number of VAT related updates to help you manage the changes. Firstly we’ve consolidated several different VAT provisions for your invoices under a new section that you will find in the purchase and sales invoice editor.

Postponed VAT accounting

On the 1st January a new postponed VAT accounting system was introduced for those importing goods from the European Union. Rather than paying the VAT upfront at the point of import and reclaiming later, it is instead declared as a reverse charge on your next VAT return.

When the Postponed accounting option is invoked for a given purchase invoice, in addition to the NET and VAT amounts featuring in Boxes 7 and 4 (respectively) the VAT amount will also be entered into box 1, thus reversing the VAT reclaimed in box 4.

Reverse charge on services

For VAT on the purchase of business to business (B2B) services, the current place of supply rules will remain. The tax will generally be subject to the country where the customer is situated and will be treated as a reverse charge.

When the “Reverse charge on services” option is invoked, the corresponding reverse charge for the NET and VAT amounts will be applied to boxes 6 and 1 respectively.

In the case where you are supplying services to EC member states and where the place of supply rules permit, from 1st January you can apply the zero rate of VAT and no further VAT options need to be selected on your invoices.

Decommissioning of non-MTD VAT filing service

On the 8th April HMRC will decommission the old VAT filing gateway, this is the one that required you to input your tax account user ID and password. If you are still filing VAT returns on this platform we recommend that you update to the new MTD based filing service ahead of the deadline. Please allow 1-2 weeks for the MTD migration to fully complete.

Updated VAT return box labels

Also from 8th April the following changes will be applied to the VAT return box labels.

Current wording:

Box 2: VAT due in this period on acquisitions from other EC Member States

Box 8: Total value of all supplies of goods and related costs, excluding any VAT, to other EC Member States

Box 9: Total value of all acquisitions of goods and related costs, excluding any VAT, from other EC Member States

New wording:

Box 2: VAT due in this period on intra-community acquisitions of goods made in Northern Ireland from EU Member States

Box 8: Total value of intra-community dispatches of goods and related costs (excluding VAT) from Northern Ireland to EU Member States

Box 9: Total value of intra-community acquisitions of goods and related costs (excluding VAT) made in Northern Ireland from EU Member States

Updated VAT return notes for box 2,8 and 9:

Box 2

For goods moved under the Northern Ireland protocol only.

Show the VAT due (but not paid) on all goods and related services you acquired in this period from EU Member States.

Boxes 8 and 9

In box 6 show the value excluding VAT of your total outputs (supplies of goods and services). Include zero rated, exempt outputs and EU supplies from box 8. In box 7 show the value excluding VAT of all your inputs (purchases of goods and services). Include zero rated, exempt inputs and EU acquisitions from box 9.

EU trade under the Northern Ireland protocol only

Use these boxes if you have supplied goods to or acquired goods from a EU Member State under the Northern Ireland protocol. Include related costs such as freight and insurance where these form part of the invoice or contract price. The figures should exclude VAT. You can find details of EU Member States in Notice 60 and Notice 725 or on the Gov UK website at www.gov.uk/topic/business-tax/vat, and at www.uktradeinfo.com under Intrastat.

Hi Glenn, thanks for this. I can’t see the additional VAT options when creating a new invoice though. Where are they please? It still says "Apply VAT
Reverse Charge2 with a tick-box but that’s all. Do I have to choose a different sale category? There doesn’t seem to be a suitable “services” option and I normally use software sales.

Hi @Pelican10,

If you scroll down to the bottom of the screen when you are in the invoice there should be options at the bottom:

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Hope this helps :slight_smile:

Thanks, but this is all I get:
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Thanks Glen & Co. Maybe need to adjust working on Edit client page.

“VAT Registered in another EC Member State” > “VAT Registered in a EC Member State”

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Can you add “out of Scope of UK VAT” to the edit company VAT options?

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Also like Pelican10 I don’t have the full range of options per your post

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In general there is no specific treatment now for EC sales vs sales to the rest of the world. Where applicable (depending on the place of supply rules) sales invoices to EC based customers should instead be zero rated. The client level EC flags will be removed in April, but remain for the time while invoices are still being input for the period before 1st January.

We will be releasing a bulk update tool to remove all EC flags in the coming days. We will also be extending the bank tagging section to allow these new VAT provisions to be applied there too. Further updates will follow.

Hi, I have removed the EC flag from my EU suppliers of goods and ticked No Special VAT treatment. What settings do I need now on the supplier page for suppliers of services which are subject to reverse charge (Amazon fees etc)?

when you create the invoice there are options at the bottom of the invoice:

You will need to tick this box :slight_smile:

Thank you :slight_smile:

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Hi, I’m still not seeing this “reverse charge on services” option. What do I need to do to see this please?

Hi @Pelican10,

It should be at the bottom of a purchase invoice

I’m on the sales invoice - should there be one on there? I need it for that. Thanks.

Hi @Pelican10,

No there is no need for it to be on the sales invoice please see Glenns response above:

Thanks. I thought services were still reverse-charged? Did I misunderstand?

If you refer to section 5 of the the Place of Supply Rules guide, they set out the criteria for applying the reverse charge. This refers only to the supply of services, where you are the customer.

https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a

For the supplies you make to EC based customers you would typically zero rate those invoices. It differs depending on whether it’s B2B or B2C so it’s worth reviewing the guidance here to determine which VAT provision to apply.

Many thanks. It’s B2B, so I’ll have a look.

The reverse charge is something that the purchaser does, not the seller. If you’re selling services where the “place of supply” is outside the UK then you zero-rate your sales invoice and add a note on the invoice telling the purchaser that they should apply the reverse charge in their own country. This is the same procedure as it was before the end of the Brexit transition, the only difference now is that you no longer have to submit an EC Sales List for cases where the purchaser is in the EU.

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Ah, OK, thanks! I have probably been doing it wrong for years then…! Previously on QF we had an “EU VAT Exemption” section which I guess I was viewing as a “reverse charge”. Thanks for the clarification!

The “EU VAT Exemption” marker was to treat the invoice as a supply of goods (not services) to an EU customer, putting the net value in box 8 on your VAT return as well as box 6 - selling services the net was only supposed to go in box 6, not 8.