Reclaiming VAT on Existing EU Purchases
Note: This text only applies to users who are VAT-registered in the UK and have paid non-UK VAT for services.Prior to version 3.1, Solar Accounts allowed users to enter non-UK VAT on purchases of services from an EU supplier. This meant that non-UK VAT was reclaimed on the UK VAT return, which is not the correct procedure. (Since version 3.1, users must reclaim EU VAT as described here).
When you upgrade your data file, Solar Accounts notifies you if there are existing transactions that have this EU VAT problem. Here's an example of the notification window:
You then need to perform two steps:
Step 1: Adjust your next VAT return
The EU VAT transactions were most likely included in a previous UK VAT return. To correct this, you will need to manually reduce the Box 4 and Box 7 figures on your next VAT return. In the above example, you would decrease Box 4 by £645 and Box 7 by £3,000. You should also notify HMRC of this adjustment.
(Note: If the transactions were recorded under the Flat Rate Scheme, you can skip this step).
Step 2: Reclaim the EU VAT
Reclaiming the EU VAT is a different process to completing your normal UK VAT return. The simplest way to reclaim the EU VAT is by completing an online application - see this HMRC web page details, or call the HMRC advice line on 0845 010 9000.
Once you receive your EU VAT refund, record it in Solar Accounts as shown below:
(Note: If the EU VAT transactions were recorded under the Flat Rate Scheme, set the From Account to 'Gain (or Loss) due to Flat Rate VAT').