As explained in the other thread I will use the self invoicing system with my suppliers. My accountant told me to write self invoices with 0% V.A.T when the suplpier is outside UK but in EC, he also told me (months and months ago) to do reversal charge from those 0% V.A.T.
Could someone explain to me what does reversal means please? and how to set this up in quickbooks 2008?
The VAT reverse charge works as follows where goods/services are purchased by UK VAT registered businesses from EU suppliers:
The supplier does not charge VAT on the supply, if the goods are to be used by the customer for business purposes.
The customer has to account for output tax on the value of the goods purchased by inclusion in Box 2 of the VAT return.
The customer can reclaim this VAT by inclusion in Box 4 of the VAT return, subject to the normal rules (i.e. that the VAT is used for taxable business activities).
The net effect of the VAT accounting is that the customer should be in the same position as if they had purchased the goods and paid VAT to the supplier.