Just a generic tip for any FreeAgent users out there with this scenario, as it's an error we see quite a bit that can lead to people paying lots of VAT when they shouldn't be.
When selling B2B services to a company outside the UK and hence charging no VAT, ensure you choose the correct country from the drop down choices in the client "Contact" (it's not just for show). You'll see elsewhere in the contact there's a dropdown box which defaults to what's normally the correct option of only charging VAT when the client's in the UK.
Quite often we see people not bother with this so FreeAgent thinks the customer is in the UK. The FreeAgent user changes the VAT rate on the sale to 0%, but this doesn't achieve the same thing behind the scenes. Perhaps similar to NW's system, doing this means the sale is considered zero rated for VAT, rather than outside the scope.
If you're NOT on the flat rate scheme, making this mistake doesn't lead to too much harm, just means potential under disclosures in boxes 6 and 8 of the VAT returns, no tax impact. If you are on the flat rate scheme, massive impact, as you'll be paying over your FRS% on these sales when you shouldn't be.
When selling B2B services to a company outside the UK and hence charging no VAT, ensure you choose the correct country from the drop down choices in the client "Contact" (it's not just for show). You'll see elsewhere in the contact there's a dropdown box which defaults to what's normally the correct option of only charging VAT when the client's in the UK.
Quite often we see people not bother with this so FreeAgent thinks the customer is in the UK. The FreeAgent user changes the VAT rate on the sale to 0%, but this doesn't achieve the same thing behind the scenes. Perhaps similar to NW's system, doing this means the sale is considered zero rated for VAT, rather than outside the scope.
If you're NOT on the flat rate scheme, making this mistake doesn't lead to too much harm, just means potential under disclosures in boxes 6 and 8 of the VAT returns, no tax impact. If you are on the flat rate scheme, massive impact, as you'll be paying over your FRS% on these sales when you shouldn't be.
Comment