Hi,
I read a few articles here but I cannot understand something about the reverse charge accounting with Solar Accounts.
I have one invoice only what is a net invoice from an EU supplier and is about a service I got. I paid net 100 pounds for that.
So as per reverse charge I was about to pay the VAT amount what is 20 pounds in my VAT return but Solar Accounts puts the 20 pounds to Box 3 as well like if it was paid already, so it cancels the Box 5 and it shows that I don't need to pay anything.
I should pay otherwise noone pays the VAT and it would be cheating.
What am I missing here?
Please help me on this one.
Thank you very much.
Hi Tom,
Imagine that you only had one purchase, and it was from a UK supplier. You would pay your supplier the VAT but you would then reclaim the VAT from HMRC on your next VAT return. The net result is that the payments cancel out - your business does not pay VAT (because it has not 'added value'). This is not cheating - it is the way the system is designed.
In a similar way, for EU purchases you pay the VAT to HMRC (instead of your supplier) but immediately reclaim it.
Regards,