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VAT & EU / EC considerations

VAT & EU / EC considerations

Firstly, please familiarise yourself with the basic concepts of VAT handling within Insight  be reviewing  the Concepts - VAT Return article

 

1. Exchange Rates

a. On a monthly basis, make sure you update the GBP to EUR exchange rates  from the HMRC web site into the Exchange Rate settings in Insight. These rates are available from the HMRC at the end of month.

You can enter these in Insight using the Tools -> Exchange Rates option.

Please ensure you have the new monthly rate set before entering any EURO transactions in Insight.

 

b. If you have entered any transactions before updating the rates, you can recalculate the transaction values based on the correct rates using the Tools -> Update VAT Base Currency values.

This is an emergency option and should not be used regularly.  In any case, this  should be done before generate a VAT return for the period in question as it will impact the values on the VAT return submitted.

 

2. Goods vs Services

When completing Box 2, 8 and 9 of the UK VAT Return, there is a distinction made between the supply of goods and services to EU customers.

For example, Box 8 should include the value of goods and their related services (eg. Delivery and Insurance). You should not include supply of separate services such as legal and professional services.

For each invoice you create for the supply of services, you should choose a Sale type that has been defined as a "VATSERVICE" using the System Parameter 10021 as shown below,

For any non-Invoiced income entered using the Add New Income Entry function, specify the Services type of income in a similar manner using the System Parameter 10015 as shown below

 

 

Any transactions that are excluded from any VAT return Box will be shown in the Excluded Transaction tab of the VAT Audit

2. VAT Due but not paid on purchases from EU suppliers

If a purchase is marked from an EU supplier, you should enter the VAT Due but not paid by you in the VAT Value box.

The Gross and Net values will be same as you have not paid the VAT, but this figure is needed for Box 2 of the VAT Return. This figure will also be included in your VAT Box 4 figure 

Example:

Business 'A' is UK VAT registered (and UK resident) and makes acquisitions from a VAT registered EU business 'B'. The goods would be standard rated (20.0%) in the UK, however as acquisition and meeting criteria is zero rated (0.0%) by business 'B' in accordance with EU directive.

You would:

1. Include Enter the value (£100) of the acquisition (zero-rated by 'B') in Gross Value (and this wll be included in box 7 and Box 9 of the VAT return (inputs)

2. Enter the VAT payable (£20) on the acquisitions based on the goods itself in the VAT Value (this will be included in box 2 (VAT due - but not yet paid by you - on goods that you buy from other EU countries and also in Box 4 of your VAT Return)

 

3. EC Supply / Acquisition

You should mark any transactions from EU customers using the EC Supply checkbox on the Expense, Income and Invoice forms.

These will be included in the ES Sales List

a. Expenditure

b. Income

 

 

c. Invoice