PayPal Fees has presented me with somewhat of a headache as they are an EU provided service which I'm treating as a bank charge. My current approach to bank charges is to put them through T2 in Sage as exempt rather than out of scope of VAT (which would be T9). I realise there is some debate over whether they are T2 or T9 however from reading the relevant section I'm of the opinion that they are exempt. So far so good however when doing my PayPal Fees I put them through T23 which is basically the reverse charge for zero rated services from the EU however as I've now discovered on the VAT return it comes through in Box 6 whereas I believe it should be Box 7. I got mislaid by several online guides to Sage tax codes which said T23 covered exempt and zero rated services however when I look at Sage's description is only mentions zero rate. Not being able to see any relevant tax code ready made in Sage I've created my own tax code, T26, which links back to T2 as EU Service Purchase. I've backed up my Sage data and corrected one of my Sage PayPal Fees entries to reflect a T26 tax code. This now appears in Box 7 as payment. Before changing the rest I'd be grateful if you could give me your opinion on this.
Thanks for the reply. I'm not actually putting PayPal Fees through T2 as PayPal are based in Luxembourg they would be subject to reverse charge so I was trying to work out the Sage equivalent of T2 was for these fees as T2 is what I use for UK based bank charges. As I found out there isn't one specifically created in Sage for Exempt EU Purchaes of Services which is why I set up T26 to cover this scenario. I then doubted myself however I've now confirmed with HMRC that they should be treated as exempt EU purchases of services and should hit box 7. So looks like I've set things up ok.
I take it you have never had anyone query your use of T2 for PayPal Fees?
However, here is what I have found so far (and I am not pretending that my confusion doesnt still creep up on me!)
Firstly, if you get charged VAT, its not reverse charge.. its just un-claimable EU VAT. So send them your VAT No.
Amazon - sends VAT invoices that clearly state reverse charge
Ebay - have a GB VAT number and say "VAT exempt" (not sure why, I thought they were sales commissions)
I haven't actually seen a Paypal fee invoice which states reverse charge mechanism has to be used. If they have charged you VAT, then its definitely not reverse charge. And as they are bank charges, they might be exempt. I just post as T0 (or you could use T2) - as long as the VAT payable is correct, then you can claim insanity on the rest!! :))
I wish these companies would make it really clear on their invoices! Or HMRC would put up something specific!
I just T9 my paypal fees, I have never seen an invoice for them or any advice that makes me think otherwise. I suppose it's one of those great debates :)
