Can anyone confirm my understand that charges made by Dropbox (a US company supplying a service) is outside the scope of VAT and therefore should not appear on the VAT return at all.
I'm glad you've said that Joanne, as that's where I'm confused. I found several comments on the internet saying it's 'outside the scope of VAT' but no-where seems to confirm if you should include it in box 7 of the return; I think it's going to be one of those questions where people have different opinions.
I've opted to treat it as 'Outside the Scope of VAT', which I believe is correct, and therefore QuickBooks will not include it in box 7 on the return when choosing that VAT code.
It's not a substantial amount of money and it doesn't effect the VAT liability anyway so hopefully it won't make too much difference if that's wrong, maybe I'll blame QuickBooks.
Goes back to yet another unclear message from HRMC. I meat move to quick books so I can blame them too!! I've got the software just not played with it yet!
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I quite like it, I've been using it for a few years now, it easy to add information to the reports and to filter them and it's been good value for money. I have several clients on my software which would cost a fortune with Sage.
Elaine, yes you are right HMRC's guidance is quite vague on this. This is why I always stick to the general rule with purchases - if in doubt include it in box 7.
If you had an HMRC inspection they couldn't care less if you included something in box 7 that you shouldn't. Plus, it never hurts to overstate the net purchases because HMRC's systems will automatically add up the net purchases from the VAT returns and if the expenses on the annual accounts come to more than those claimed on the VAT returns you may expect an inspection, or at least be asked some questions. Whereas if the net purchases on the VAT returns exceed the expenses claimed in the accounts then HMRC do not care, they just assume that you haven't claimed all the expenses in the accounts.
I have dealt with loads of VAT inspections over the years and I am always bothering the inspectors to pick up tips!
As with the purchases, HMRC's computers check that the net sales on the VAT returns are not less than the total income shown on the accounts. If they are, then HMRC may assume that some income has been left of the VAT returns and therefore VAT has been underpaid.
It is not an exact science as HMRC's computers do allow for tolerances, but I have never known an inspector to be concerned about an entry being included in the wrong box on a VAT return, they are only concerned with VAT underpaid.
I agree with Richard. Even though sales to the USA are 'outside the scope', notice 700/12 states that supplies which are outside the scope of UK VAT as described in Notice 741A Place of supply of services should be included in box 6.
