VT Transaction+

If you determine that the place of supply of a purchase of services is outside the UK, it is normally outside the scope of UK VAT and the purchase should be entered in VT Transaction+ with no VAT. If you are entering a PIN transaction, leave the Type of sale (for VAT purposes) setting as Normal (for supplies of services, Great Britain and Northern Ireland are both considered to be within the UK for VAT purposes).

There is some confusion as to whether purchases of services from abroad outside the scope of UK VAT should be included in Box. 7 of the VAT return. According to HMRC VAT Notice 700/12, there is only a small list of items that should be excluded from Box 7, and this list of exclusions does not mention purchases of services from abroad. On that basis, this type of purchase would be included in Box 7. This will happen automatically when you run the VAT return, provided that the analysis account used for the transaction is set to being within the scope of VAT (even though this may seem counter-intuitive). This setting can be checked and changed as described in Transactions outside the scope of VAT.

Note: If you are on the VAT cash accounting scheme, HMRC makes no mention of services outside the scope of UK VAT being excluded from the scheme in the HMRC VAT Cash Accounting Scheme Manual. On that basis, this type of purchase would be included in the scheme. However since VAT is not payable, this does not have any impact on VAT other than the timing of when the purchase is included in Box 7 of the VAT return. If you have the cash accounting setting on in VT Transaction+, the purchase will be included in Box 7. at date of payment, rather than the at the date of purchase (if different).  

Completing your VAT return

If you follow the steps above, the VAT return will automatically be populated with the required value in box. 7 as follows: