Forum

• # 75305
• Mon 17 Oct 2011 09:11 AM

I have just taken on a new client who has VAT registered suppliers in Europe, this is my first venture into this area.  Invoices have a total for the goods (say £1000) and 0 VAT figure.

Do I work out the VAT for the VAT return:

1. By adding 20% to the total for the goods (eg. £1000 + 20% = £1200)
2. By working out the VAT as being included in the total (eg. £833.33 + £166.66 = £1000).

I believe it is the former of these two, however the bookkeeper who I took over from has used both methods in the two previous returns which is causing doubts in my mind.

Any help much appreciated

Pete

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• # 75310
• Mon 17 Oct 2011 09:54 AM

Hi Pete,

Method 1 that you quote is the one to use.

Add 20% VAT on your £1,000 worth of goods to boxes 2 and 4 of the VAT Return.
This is called the reverse charge mechanism.
Your client will have previously provided his GB VAT number to the French vendor to receive a zero rated supply, and this should be quoted on the invoice received, as the French will declare the sale on their European Sales list.

Also include the goods value of £1,000 in boxes 7 and 9 of the statistical part of the VAT Return.
Box 7 should be automatic as the invoice is part of your PDB analysis.

Failure to enter to boxes 2-4-7-9 could result in four errors being recorded if spotted at an inspection.

If the invoice has been issued in Euro, make sure that you have a reasonable exchange rate in place, or else use the HMRC monthly rate quoted on their webpages.

As an added distraction, try and ascertain how much EU trade your client has; both sales and purchases, as there are other mandatory reporting requirements if it's significant - c.£600K imports or £250k exports.

Hopet his helps

• Kind regards,
  PeteL  

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• # 75311
• Mon 17 Oct 2011 10:50 AM

Pete,

Thanks, that is how I believed it should be done.  All I have do now is inform Mr Vatman of the error in the previous return although it makes no difference to the amount of VAT paid/reclaimed.

Client is well under the limits you mention, I had already ascertained that. 

Kind Regards

Pete

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• # 75584
• Mon 24 Oct 2011 01:20 PM

Pete

I am sure that the reverse charge mechanism does not apply to the importation of goods from the EU.

The reverse charge mechanism is to do with the provision of services.

As far as goods being imported there should be no VAT recorded in box as it would not have had VAT charged and the net value is entered into box 9.

Anyone else like to confirm or correct.

Kind regards
Stuart

• Forum Moderator, South East & Greater London Regional Chairman
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• # 75925
• Tue 01 Nov 2011 02:47 PM

Hi Stuart

You are correct you can't add the VAT on as you cannot claim it you have not paid it. I have sales and purchases to EU countries, my accountants have told me to (this is on Sage) Post sales to T4 - sales to customers in EC but you must have their VAT number and Purchases to T8 this will show in your VAT return in the correct boxes box 2 and box 9. HRMC then send you forms to complete relating to these sales and you have to advise of the VAT number and also the Indicator if it is for services then you have to indicate 3 and the value in GBP the form is simple to complete.

My Accountants are quite happy with this method of recording, and to date I haven't had any come backs from the Vatman.

Hope that this is of some help

Carolyn

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• # 75945
• Tue 01 Nov 2011 07:05 PM

Carolyn Hillsaid:

“Hi Stuart

You are correct you can't add the VAT on as you cannot claim it you have not paid it. I have sales and purchases to EU countries, my accountants have told me to (this is on Sage) Post sales to T4 - sales to customers in EC but you must have their VAT number and Purchases to T8 this will show in your VAT return in the correct boxes box 2 and box 9. HRMC then send you forms to complete relating to these sales and you have to advise of the VAT number and also the Indicator if it is for services then you have to indicate 3 and the value in GBP the form is simple to complete.

My Accountants are quite happy with this method of recording, and to date I haven't had any come backs from the Vatman.

Hope that this is of some help

Carolyn”

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• # 76069
• Thu 03 Nov 2011 10:09 PM

To clarify what goes in the VAT return:
For purchases of goods from the EU ,the acquisition VAT goes in boxes 2 and 4 (subject to normal rules) and the amount paid goes in boxes 7 and 9
For the purchase of services from the EU (which fall under the "new" basic rules that the place of supply is where the customer belongs), then the reverse charge VAT goes in boxes 1 and 4 (as above) and the amount paid goes in boxes 6 and 7

http://www.hmrc.gov.uk/vat/managing/returns-accounts/completing-returns.htm#5 refers.

Hope that helps

Nicola
AIIT

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