What's this "VAT Reverse Charge" all about then?

[d000hg]

Happened to hear this mentioned in a radio ad for Xero, never heard of it previously but it came into effect from this month as I understand it.
Is it relevant to us itty bitty contractors? Is this the additional Brexit faff for companies trading with the EU or was that something else?

[Wobblyheed]

I'm remotely contracting to a Danish client. My invoice is paid in euros and does not include VAT but has a Reverse Charge Tax code on it.
This was provided by the Danish agency. That's the sum of my knowledge.

[NotAllThere]

Is this the additional Brexit faff for companies trading with the EU or was that something else?

I think it might be. I've been developing ZUGFeRD compliant invoices for a German company, and VAT Reverse Charge keeps raising its ugly head. I'm afraid I just modify the code to give the correct output - I don't delve into the whys and wherefores.

[MPwannadecentincome]

It means you are not collecting VAT on behalf of HMRC, the recipient of the invoice has to deal with the VAT themselves.
I have seen reference to it's use in the construction industry in the UK, otherwise as with the above posters, it is used for EC sales invoices, the recipient in the EC has to declare the VAT to their own tax collectors rather than pay it to you. The invoice needs to mention the VAT code of the recipient and every quarter you fill in an EC Sales Return to HMRC listing all invoices (in £ equivalent) by the VAT code of the recipient. Not sure what HMRC does with that but in theory they could share it with the tax collector in the other country for them to pursue the VAT due.

[Lumiere]

The invoice needs to mention the VAT code of the recipient and every quarter you fill in an EC Sales Return to HMRC listing all invoices (in £ equivalent) by the VAT code of the recipient.

None of this is required after 1 Jan 2021.

[MPwannadecentincome]

None of this is required after 1 Jan 2021.

This is not correct, I have been advised by UK accountant and HMRC sent me a EC Sales Return to fill in just a few weeks ago.
I have also had it confirmed by a tax specialist in the country where my client is located.

[Guesstimator]

None of this is required after 1 Jan 2021.

So we now submit invoices to client inlclusive of VAT instead (before I didn't charge VAT) as I understand it?
And then pay VAT to HMRC in the usual way?

[TheCyclingProgrammer]

So we now submit invoices to client inlclusive of VAT instead (before I didn't charge VAT) as I understand it?
And then pay VAT to HMRC in the usual way?

No, the reverse charge rules still supply. If the place of supply is outside the UK it’s outside the scope of UK VAT and if the customer is in the EU they will account for VAT under the reverse charge.

Similarly if you’re a UK business and you’re purchasing services from overseas and the place of supply is the UK you should be accounting for UK VAT on those purchases under the reverse charge.

What has changed since 1 Jan is the requirement to submit an EC Sales list no longer applies to UK businesses:

https://kb.taxcalc.com/index.php?Vie...y&EntryID=3124
https://www.gov.uk/guidance/vat-how-...-your-eu-sales

The poster above appears to have been poorly advised.

[MPwannadecentincome]

What has changed since 1 Jan is the requirement to submit an EC Sales list no longer applies to UK businesses:

https://kb.taxcalc.com/index.php?Vie...y&EntryID=3124
https://www.gov.uk/guidance/vat-how-...-your-eu-sales

The poster above appears to have been poorly advised.

Oh this is good to know then, the last one I filled in was for a period covering the last part of 2020. So I never get another one of those forms in the post again ... yay!

[Fred Bloggs]

For the benefit of 100% clarity, if your UK company is below the UK VAT threshold and therefore isn't VAT registered - Then for EU sales there's nothing to do with VAT at all?