Hi - I am having bit of a brain ache and just need a sounding board please.
I am using Xero for the first time, after 30 years of Sage, and I just need a bit of help making sure I am understanding it properly.
My client buys and sells goods and services from and to the UK, the EC and outside EC. My client has just gone VAT registered. He is sole trader (not that that has any impact really).
On his sales invoices to EC countries we have the EC client's VAT number and no VAT is charged, and in Xero these invoices are coded using Xero Rated EC Services (when he is selling advertising space etc).
When buying goods from EC suppliers, if they have my Client's VAT number on their sales invoice to us, then no VAT should be charged, but in Xero should I use EC Acquisitions (20%) or EC Aqusitions (Zero Rated).
Has anyone had any luck telling the likes of Microsoft and Facebook in Dublin that they are VAT registered and now get invoices without being charged VAT?
I'm sure it's staring me in the face, but I just want to double check before I get too many months in to it.
Hi Victoria Sounds more like a VAT query although I may be reading it incorrectly.
First of all - a sage user of 30 years!!!!! Wow. There are always loads of sage queries on here so you could help out with answering (apart from answering freeloading businesses of course). Always good to get the info flow going both ways and we always need more help as its falls to the same few people who regularly answer. How about it?
Re your Q - no. If anyone else on here uses zero smerro (as I call it) they dont provide any answers, although Im sure Ive heard Vince maybe has one client using that software so you never know. re the other Qs
You say On his sales invoices to EC countries we have the EC client's VAT number and no VAT is charged - I assume you mean there is VAT but its based on reverse charge,therefore being picked up under EC services are the correct rate.
Are ALL of his clients BTB or are some BTC? If the latter does MOSS come in to play?
Crucial info missing on the goods side - what exactly is it that he is bringing in from the EC?
You will only have luck with Microsoft if he has actually opened a business account with them, in which case just get your client to add the VAT number online. If he set it up as a personal account, then they will not change it until he has converted it to a business account. A lot of folk open a personal account because they think it works out cheaper!
-- Edited by Cheshire on Saturday 19th of January 2019 10:35:39 AM
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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
As Joanne says, this is definitely more of a VAT query than a Xero one - and my one Xero client doesn't use these particular VAT codes.
I think the code to use for purchasing goods with the VAT deducted at source would be EC Acquisitions (20%). This should still show no VAT (because it's been handled at source) but tells the software (and therefore in theory HMRC on the VAT return) that there was a VAT element involved.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
He buys motorcycle parts and clothing. You are right, I did mean that there is VAT due on the items but it's not charged under the reverse charge. His clients are a mixture of BTB and BTC - I'll need to look up MOSS to check if it's applicable.
Thanks for the help as always.
I will try to dip in a bit more and help with some of the Sage questions!
Joanne and Vince, just one more thing (sounding like Columbo) ..
Re the likelhood of getting MSFT et al to set him up as a business account and reverse charge the VAT. If he is currently able to get VAT invoices printed off from his personal acccount, can I then just claim the VAT as normal?
Hi Victoria
Im a bit confused by the comment 'its not charged under the reverse charge'?
Should it not be?
Might just be the way Im reading it.
Anyway inwards good - motorcylce parts will be at usual 20% so EC Acq 20%.
Adult clothing the same. Childrens clothing will be EC Acq 0%.
Both of the above assuming its reverse charge of course as you assume the VAT rate charged as if you were adding it.
Outwards goods - Ive assumed you are ok with that,although yes check out MOSS for digital stuff B2C (of which advertising is one, but I assume he isnt selling advertising to B2C so you should be ok).
Microsoft etc - you are able to get invoices printed form the online portal. But if its a personal account then no he cannot reclaim/tough he has to stand the VAT. So - an incentive to change it then!
Given Vince's comments re zero smeero - worth checking with them how the processing itself occurs (as long as you know are ok with the accounting given they cannot advise on that). The beauty of online cloudy software, apparently, is their help desks, although QB is all via forums I believe (at least Sage have that one right with their cloudy stuff - phone or email or online).
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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
Joanne: As you say, yes, it probably does depend on the nature of the goods - but this isn't really my area. (I do use this myself, in Sage, but I know my stuff is okay.) This takes us back to your original point: It's a VAT question, rather than a Xero one, so we perhaps need someone like Les to notice the thread.
And Victoria: Adding to what Joanne says about MSFT. I've a suspicion they invoice from the Republic of Ireland, so even if the client could reclaim the VAT on a personal account with them, he wouldn't be able to because of that. That's the whole point of the reverse charge mechanism. The way it works - probably massively oversimplified - is this:
* The sale by MSFT is recorded in a particular way in their accounts so that the Irish tax office knows that there's a VAT element owed to the UK tax office.
* The purchase by your client is recorded in a particular way in his accounts so that the UK tax office know they're owed some tax by by another EU tax office (the purchase side doesn't indicate the source).
Whereas at the moment, he's paying the full amount, including VAT, and that VAT is paid by MSFT to the Irish tax office. If he could just reclaim it, he'd be reclaiming it from the UK's tax office - i.e. reclaiming VAT that has never been paid to them, which is clearly not right, and neither tax office would know that there has been tax reclaimed by one that was paid to the other.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
