Hi,
I'm on the Flat Rate VAT system and have purchased some software online from the EU. The supplier has not charged VAT stating customer to self assess VAT which I believe to be correct.
Could you please advise how I should deal with this in the accounts and VAT return. I've tried entering the transaction in the accounts and changing the VAT treatment (under the more options tab) to Purchase of Goods from EU Supplier - is this correct? (As an aside should it be Supply of Services from EU or something else - is software classed as goods or services)?
Even then the accounts insist that I still need to enter a VAT rate on the transaction - should this be 0 or 20 percent?
Once this is sorted will Solar Accounts deal with the EU supply boxes on the VAT return or do I need to do this manually?
Many thanks,
Gary
Hi Gary,
Software is considered a 'service' since you are really paying for the software licence, not the physical product. Record the purchase transaction with VAT Treatment set to 'Purchase of Services from EU Supplier' and set the VAT rate to 0%.
Also, in the purchase transaction window click More Options > VAT Treatment > VAT Treatment Details, then remove the tick next to 'Flat rate scheme applies to this transaction'. (We hope to make this step unnecessary in a future release).
Solar Account will then calculate the VAT return boxes correctly. Note that this transaction will not affect Box 2 or Box 9 because these boxes are for the purchase of EU goods, not services. Instead, Solar Accounts will apply a special rule called the 'reverse charge' which puts 20% of the purchase in Box 1 and Box 4 - these amounts cancel each other out so there is no effect on the Box 5 figure.
Regards
Hi,
Many thanks for your prompt reply and clear instructions.
Could you please clarify why I should remove the tick from the flat rate applies box as I am on the flat rate? This seems count intuitive.
Regards,
Gary
Hi Gary,
Essentially because Solar Accounts doesn't calculate the VAT return figures correctly for this type of transaction if you tick the 'flat rate scheme' box. (Previously the flat rate scheme rules regarding a purchase of services from EU were unclear - HMRC have now clarified the rules but we haven't updated Solar Accounts yet).
Regards,
Okay thanks.
So I can see that this has added 20% of the purchase price to boxes 1 and 4, cancelling each other out so no change in box 5 as you say.
It has also added the purchase price (excluding VAT) to boxes 6 and 7. Is this correct?
Thanks again,
Gary
Hi Gary,
Yes that is correct.
Cheers
