Question

Reverse charge VAT for EC services when partially exempt

Forum|Forum|3 years ago
September 20, 2022
10 replies
18 views

Hi all

I'm trying to account for this: in QBO

https://www.gov.uk/vat-on-services-from-abroad

We're partially exempt as we're grant funded but can claim the VAT back from the funder (rather than HMRC) as an incurred expense (this is what we do when we're charge UK VAT) so what I need to do is

1) Add in the 20% VAT charge of these invoices to box 1 of my VAT return

2) "Charge" this VAT amount to the relevant expense nominal code as we can't claim it back via HMRC but can claim it back from our funder.

I've just confirmed with our accountant that this is what I need to do so the process above is not in question.

I just need to know HOW to do it in quickbooks online. Ideally I'd like to be able to adjust this via a journal but am struggling to do so that it hits Box 1 of my VAT return.

Thank you!

QuickBooks Online

Adrian_A

Level 8

Hi Bernice Cole,

I'm here to walk you through the steps in recording the VAT from the funder.

First, you can add a service item to account for the 20% VAT. Then, add it as a line item on the expense transaction. Here's how:

From the + New tab, select either Bill or Expense.
Select the name of the funder or add them as your Payee.
Select the service item you created earlier.
Enter the AMOUNT.
Select a VAT category.
Click Save and close.

You can also visit this page or more on the reverse charge procedure: GOV.UK.

I'd appreciate if you can update me on how it goes. I'm always here to help.

B

Bernice Cole Author

Thanks Adrian but this doesn't do what I need it to.

The link you sent is for domestic reverse charge VAT which is not what I'm talking about.

The original bill is from a Dutch supplier and doesn't have VAT payable on it BUT reverse charge VAT does apply. I've spoken with an accountant and they have confirmed I need to

1) add 20% of the bill amount to box 1 of the VAT report to pay to HMRC. The supplier doesn't get anything.

2) As we can claim the above back from the funder (not the same organisation as the Dutch supplier), I also need this to be recorded as an expense.

I can set up a journal but can only post to VAT control, not box 1. This is what I need to do on QB.

Can you let me know how I can do this.

Thank you!

paul72

Level 6

Thanks Paul - this does look very convoluted and I have multiple transactions I need to adjust in this way so I'm not sure of the practicalities of this. The tax expert has suggested a journal would be an appropriate way to account for this in QB. Is there no way of doing this in QB?

Alternatively, I have found this which would seem to do what I need as it both adjusts box 1 and creates and expense that I can charge back to the funder: https://quickbooks.intuit.com/learn-support/en-uk/help-article/report-management/create-delete-vat-adjustment/L4jcr3uMC_GB_en_GB?uid=l8lsai5k

My only question is the amount I put in the adjustment, the full adjusted amount (so the original amount plus the vat needed to be recharged) OR just the recharged VAT amount.

Thanks!

Bernice

OK, one last shot!

The difficulty is that RCSG is not a single VAT code in QBO - it's a Grouped Code but the underlying codes (RCSGP & RCPSG) are hidden from the user (but are shown on the VAT100 if you look carefully). You have to cobble a few together to get the result.

Line 1 will add the VAT to boxes 1 & 4 - standard RCSG transaction.

You then need to remove the VAT from box 4 - line 2 should do just that.

Check this on the VAT100 - I haven't checked as I only have live QBO accounts.

Now you need to add the whole cost into the expense account - line 3 - as you would enter a UK invoice.

The balance to pay the supplier is £100 (as it should be).

HMRC receives £20 - via box 1 (if it works).

The overall effect on the expense account is £120 (as it would be with a UK supplier) which is reclaimed from the funder.

I think, to do the same with a journal, you would have to do something similar. A journal must balance (nett £zero) so you don't have any more freedom to manoeuvre.

Hope this helps.

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