Skip to main content
B
Bernice Cole
September 20, 2022
Question

Reverse charge VAT for EC services when partially exempt

  • September 20, 2022
  • 1 reply
  • 0 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! 

1 reply

Adrian_A
Adrian_A
September 20, 2022

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:

 

  1. From the + New tab, select either Bill or Expense.
  2. Select the name of the funder or add them as your Payee.
  3. Select the service item you created earlier.
  4. Enter the AMOUNT.
  5. Select a VAT category.
  6. 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
September 28, 2022

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
paul72
September 28, 2022

Hi @Bernice Cole  

 

@Bernice Cole  wrote:

I've spoken with an accountant and they have confirmed I need to.

 

Personally, I think this is wrong but "ours is not to reason why"!

 

If you use RCSG20% VAT code on the line item it's going to add/subtract the VAT & leave you with £nil to pay to HMRC.  QBO VAT codes are not intended for partial use - so you have to work around what you have.

Since you seem to insist on paying the VAT, you will need to use VAT code S=20% on that line.

Your bill value is now 20% too high - so you need to enter a negative line to compensate (use VAT code NoVAT to keep it off the VAT100).  Post this line to your funder's account.

 

Supplier gets the correct payment.

HMRC gets 20%.

Funder covers the 20%.

 

This is doing the same job as a journal moving the expense from VAT Control to Funder's account.

 

Hope this helps.

Terms & ConditionsAccessibility statement