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)?
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.
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.
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.
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.
You did need to do the ECSL up until 31st December, you just shouldn’t put anything in box 8 for services - QuickFile has never really supported EC sales or purchases of services properly until now, you’ve always needed to either do manual adjustments to box 8 or file your ECSL directly with HMRC rather than through QuickFile. It’s never had a way to put invoices into the ECSL but not into box 8.
Hi Ian. I’m also selling B2B services to the a client in the EU and have a couple questions as you seem to be an expert on this topic
When setting up the client in QF - do I need to tick any of the boxes under the VAT settings? (curretnly I have ‘No special VAT treatment’ selected)
When creating the sales invoice for the same client - if my understanding is correct, I should NOT select any of the options there (i.e. ‘VAT Exempt’ or ‘Out of Scope for UK VAT’), instead I should set the VAT manually to 0%
The comment I’ve been advised to include on the sales invoice is: “VAT reverse charge mechanism applicable based on article 196 Directive 2006/112/EG” - do you think this would be sufficient?
No this was only needed for invoices before 1st January. Checking the “VAT Registered in EC Member State” on the client settings exposed the EC VAT Reverse Charge checkbox option in the top right of the invoice editor, you no longer need to use that box for invoices issued from 1st January.
Yes that’s correct, you would set the VAT to zero in the itemised section if the sale meets the requirement to be zero rated. You can refer to the HMRC Place of Supply rules to determine if the sale qualifies to be zero rated.
This is quoting an EU directive which is no longer needed. For B2B services you’d need to evidence that you’re dealing with a business customer, you can do this by requesting and checking their VAT number.
Supplies of services where the “place of supply” is not the UK are technically considered “outside the scope of UK VAT”, but you’re still supposed to include the net value in box 6 on your VAT return. @Glenn can confirm for definite but I believe that ticking the “out of scope” box in QuickFile will exclude the invoice from box 6, therefore the correct course of action in this case would be just to treat it as zero rated by selecting “no VAT”.
Basically what you’re doing with this statement is reminding the customer that they’re responsible for accounting for any taxes under the rules applicable in their country, and if they’re in the EU then that directive is still the rule that applies to them (even though it no longer applies to us in the UK) so it doesn’t seem unreasonable to me. Your responsibility as the seller under UK law is just to satisfy yourself that you’re definitely dealing with a business customer rather than a consumer, to justify zero-rating the invoice based on the place of supply rules.
I still need to chose one of the options on the Client Details page.
If “No special VAT treatment” shouldn’t be used anymore and “VAT Registered in EC Member State” shouldn’t be used for invoices issued from 1st of Jan 2021, then it only leaves me with the option of “Exempt or out of scope for VAT purpose” - so this seems to be the right option (by process of elimination )
