I found some information in the forum about VAT Returns - Box 7: your total purchases excluding VAT:
"You enter the total amount of purchases that are standard, zero rated or exempt. You do not include anything that is outside the scope of VAT.
Remember also that purchases from non VAT registered companies should be set to zero rated and included in the total net purchases." Edited by semsley on Tuesday 13th of July 2010 08:36:30 PM
My question is:
What is the VAT legislation? Can I find what's included in the total net purchases in Value Added Tax Act 1994
The actually VAT legislation can be found here http://www.legislation.gov.uk/ukpga/1994/23/contents although there are amendments over the years and you should also be aware of the VAT Notes issued by HMRC.
Essentially, Box 7 (and all the boxes on the bottom half of the return) are for statistical reporting purposes - so the Government can see what is being purchased/sold within the Country and therefore how the economy is running.
Items that are outside the scope of VAT are identified as:-
"Outside the scope of VAT
There are some things that aren't in the UK VAT system at all - they're outside the scope of VAT. They are not taxable supplies and no VAT is charged on them. Items that are outside the scope of VAT include:
* non-business activities like a hobby - for example, you might sell some stamps from your collection * fees that are fixed by law - known as 'statutory fees' - for example the congestion charge or vehicle MoT tests"
So therefore, anything that does not fit into this category MUST be reported in Box 7. This includes everything that is standard rated, zero rated or exempt.
It is explicitly stated in the HMRC notes that zero-rated and exempt supplies should be included in Box 6, it is not stated that zero rated, exempt purchases and also that purchases from non VAT registered companies should be included in Box 7
The boxes on the bottom half of the return have had people thinking for a while and I have actually seen some firms of accountants who calculate what the VAT claimed is and then gross it up for the Box 7 figure. The correct figure to enter into this box (and box 6 for the outputs) is exactly as stated on HMRC's website. It is the total value of purchases excluding those items as defined above and outside the scope of VAT (as also shown in your link).
For example; all company expenditure which relates to the supply of goods and services (even from those persons who are not VAT registered) and also items which are zero rated (postage, products etc.) I have a client who runs a convenience store and around 60% of the stock purchased for resale is zero rated but this is still included in the Box7 figure. They also have suppliers who are not VAT registered but the cost of these supplies is still included. However, the tax for their van (which is outside the scope) although included as an expense in the accounts does not appear in this box.
On your link, the items stated in 5.6 Box 6 also apply to Box 7; I think you'll find that they just didn't want to repeat themselves. :) but also note the sentence "See also common items for boxes 6 and 7 below." at the bottom of 5.7 Box 7. The clue with Box 7 (and also Box 6) is the heading of the box "Put in box 7 your total purchases/inputs excluding any VAT."
Exempt goods and services There are some goods and services that are exempt from VAT. Exempt goods and services are not taxable for VAT, so if you supply them, then:
you don't charge any VAT on them you don't include them in your VAT accounts *** you can't normally claim back the VAT on related purchases
I would think if you don't include Exempt supplies you would not include exempt purchases - So now I am confused is Exempt from VAT included in box 7 on the VAT return or not. I read this as not.
Thanks
-- Edited by luthier on Wednesday 29th of June 2011 12:22:27 PM
To quote HMRC directly (see http://www.hmrc.gov.uk/vat/managing/returns-accounts/completing-returns.htm)
Sorry about the formatting, just a quick cut and paste.
How to complete box 6 and box 7
Box 6: your total sales excluding VAT
Enter the total figure for your sales (excluding VAT) for the period, that is, the sales on which you charged the VAT you put in box 1. Additionally, you should also include:
any zero-rated and exempt sales or other supplies you made any amount you put in box 8 goods or services you have supplied that are subject to the reverse charge gold or services that you have purchased that are subject to the reverse charge exports outside the EU
Take off the net amount of any credit notes you issued or debit notes you received.
Don't include:
loans, dividends and gifts of money insurance claims
Find information about VAT rates and items that are exempt from VAT or outside the scope of VAT Reverse Charge Sales List
If you make reverse charge sales - sales to which a reverse charge is applied - you must notify HMRC and send in regular Reverse Charge Sales Lists.
Read more about Reverse Charge Sales Lists Box 7: your total purchases excluding VAT
Enter the total figure for your purchases (excluding VAT) for the period, including:
the purchases on which you paid the VAT you put in box 4 anything you bought that the reverse charge procedure applies to any amount you put in box 9
Don't include:
expenses like salaries and taxes anything outside the scope of VAT like vehicle licences, MOT certificates and local authority rates
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Just answered this on another thread, and to be honest, the HMRC website does contradict itself (used "contradict" twice today, must be my word of the day)
But I agree (Used that too many times today as well) it should be entered in box 7
