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Reverse charge VAT calculations

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    Reverse charge VAT calculations

    It has become crystal clear that my accountant is completely clueless about reverse charge VAT so I am pretty much having to do this myself. Just wondering if anyone here had experience with it and could check my calculations..

    revenue exc VAT 50k, so vat is 10k
    all purchases exc VAT 8k, vat reclaimed 600

    In a normal situation VAT payable is 10k - 600 = 9400

    But 5k was charged by a contractor abroad so we apply reverse charge rules

    5k * 0.2 = 1000 reverse charge VAT

    So Box 1 becomes 10k + 1000 = 11000
    Box 4 becomes 600 + 1000 = 1600
    So Box 5 (total payable) remains unchanged 11000 - 1600 = 9400

    However from what have read boxes 6 and 7 are also affected. In a normal scenario Box 6 is 50k and Box 7 is 8k. Am I correct to understand that 5k is also added to Box 6 and Box 7? Even though box 7 ALREADY includes the 5k since it has been paid.

    #2
    According to how Xero manages reverse charge transactions, my Zoom payments of 11.99 have an extra 2.40 added and both values go into Box 1, Box 4, Box 6 and Box 7 so the net effect is nil.

    Xero has a VAT code option called 'Reverse Charge Expenses' and it automagically does all the necessary entries for my VAT return.

    Comment


      #3
      Out of interest what are you applying the reverse charge to? I thought the list was very limited?
      'CUK forum personality of 2011 - Winner - Yes really!!!!

      Comment


        #4
        Originally posted by ladymuck View Post
        According to how Xero manages reverse charge transactions, my Zoom payments of 11.99 have an extra 2.40 added and both values go into Box 1, Box 4, Box 6 and Box 7 so the net effect is nil.

        Xero has a VAT code option called 'Reverse Charge Expenses' and it automagically does all the necessary entries for my VAT return.
        Right so it's 11.99 * 0.2 = 2.4 VAT

        My accountant seems to think that it is 11.99 / 1.2 = 9.99 and 2 VAT so 2 goes to box 1 and 4 and 9.99 goes to box 6 and box 7

        Comment


          #5
          Originally posted by northernladuk View Post
          Out of interest what are you applying the reverse charge to? I thought the list was very limited?
          Buying development services from abroad

          Comment


            #6
            Originally posted by northernladuk View Post
            Out of interest what are you applying the reverse charge to? I thought the list was very limited?
            It’s not limited at all. Any services purchased from outside the U.K. where the U.K. is considered the place of supply are subject to the reverse charge. This could be software, web hosting, consultancy services and other professional fees etc.

            Comment


              #7
              Originally posted by cannon999 View Post

              Right so it's 11.99 * 0.2 = 2.4 VAT

              My accountant seems to think that it is 11.99 / 1.2 = 9.99 and 2 VAT so 2 goes to box 1 and 4 and 9.99 goes to box 6 and box 7
              You treat the cost as net of VAT, so you calculate VAT on top. Your accountant is wrong.

              And yes, the deemed value of the supplies does go in boxes 6 and 7.

              https://www.gov.uk/guidance/how-to-f...e-70012#para46

              Comment


                #8
                Originally posted by TheCyclingProgrammer View Post

                You treat the cost as net of VAT, so you calculate VAT on top. Your accountant is wrong.

                And yes, the deemed value of the supplies does go in boxes 6 and 7.

                https://www.gov.uk/guidance/how-to-f...e-70012#para46
                Thanks for confirmation, yeah this is the conclusion I came to after doing my research.

                Comment


                  #9
                  I've only needed to do RC VAT for electronic services (vps hosting) so far. These are my notes cribbed from an HMRC page somewhere past:
                  Reverse charge (services): You calculate the amount of VAT (output tax) on the full value of the services supplied to you, and then enter on your VAT Return the amount of VAT you calculated in box 1, and if you’re entitled to reclaim the VAT on your purchase of these supplies, also put the same figure in box 4 (this in effect cancels out the figure in box 1), full value of the supply in both box 6 and box 7.
                  For example you have given the supplier your VAT no., they sent you a VAT invoice for £12, and the invoice states that VAT is reverse charged.

                  Net: £12 (added to both Box 6 and Box 7)
                  VAT: £12 x 20% = £2.40 (added to both Box 1 and Box 4)

                  Box 5 = Box 4 minus Box 1. So it's a nil sum game as far as VAT owed to HMRC.

                  HTH.

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