The following information is for general guidance only and should not be taken as definitive VAT advice, since individual circumstances may vary. To determine the VAT treatment for your particular transactions please refer to HMRC guidance or seek tax advice from an accountant.
Introduction
If you determine that the place of supply (as explained in Purchases of services from abroad) of a purchase of services from an overseas supplier, is the UK, it is normally subject to UK VAT under the reverse charge mechanism.
To enter the purchase:
Note: If you are on cash accounting, refer to Reverse charge services from abroad (if on cash accounting) instead.
Please ensure you are using the latest version of VT Transaction+ by downloading it from our website (for VT Transaction+ only subscribers, download from here; for VT Final Accounts & VT Transaction+ subscribers, download from here).
1.Using the PIN (or PAY for a non-credit purchase) transaction, enter the following in the header section (Note: the P+R transaction cannot be used for this method):
Total |
Input VAT |
Net |
Net amt |
0.00 |
Net amt |
| In the analysis of net amount section, enter in the following in this order: |
Amount |
Analysis Ledger |
Analysis Account |
VAT amt (enter as a plus) |
Creditors |
VAT - Input |
VAT amt (enter as a minus) |
Creditors |
VAT - Output |
Net amt |
Expenses/Cost of Sales |
The relevant account for the purchase |
| For example for a purchase of £100.00 of services subject to the reverse charge: |
2.You also need to manually edit the transaction so that net amount gets picked up in Box 6. of the VAT return:
a)In any report that includes the transaction, right-click on the transaction and select Edit Transaction
b)In the Entries to be changed box, select Creditors: VAT - Output
c)In the Net transaction value (£) box enter the net amt as a minus figure
For example:
| Adjustment to the Net transaction value (£) field to include net amt in Box 6 of the VAT return |
Completing your VAT return
If you enter the purchase along with the manual adjustment as described above, the VAT return will
with the required values in the appropriate boxes as follows:
VAT return element |
Included in VAT return |
Amount included |
Reverse charged output VAT |
Box 1 |
VAT amt |
Input VAT reclaimable |
Box 4 |
VAT amt |
Net amt (deemed to be a 'supply') |
Box 6 |
Net amt |
Net amt |
Box 7 |
Net amt |
If these do not appear correctly when running the VAT return, check that the following actions have been done:
•you have entered both the output VAT and input VAT described in step 1. above
•you have entered no VAT in the header of the purchase transaction described in step 1. above
•you have made the manual adjustment described in step 2. above
•the analysis account for the purchase is set to being within the scope of VAT (by default, expense and cost of sales accounts are set to being within the scope of VAT - this can be checked in account properties (Set Up>Accounts>All...select account>Properties)
