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VT Transaction+

Navigation: Value Added Tax > Purchases of services from abroad

Reverse charge services from abroad

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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:

Revchargeinv

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:

Net value VAT

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)