Hello,

I noticed that Solar Accounts includes zero rated sales, and sale of goods outside the EU, within the calculation of Flat Rate Turnover. This means you're paying VAT to HMRC on sales that you didn't collect VAT on. Is this correct?

Reading the HMRC guidance that does seem to be correct, but I wanted to ask the question directly. Saying it out loud (paying HMRC for VAT you didn't collect) makes me pause...

Grateful if you could confirm Solar is working correctly at least.

I'm going to reply to myself here, because I've discovered something that makes me pause in regard to Solar Accounts treatment....

1. Sales of Goods and Services to individuals outside the EU are deemed "outside the scope" of VAT, according to the HMRC guidance rules here:
   http://www.hmrc.gov.uk/vat/forms-rates/rates/rates.htm#4

2. Under the Flat Rate scheme, items "outside the scope of VAT" are required to be excluded from the calculation of Flat Rate Turnover, per the HMRC guidance rules here:
   http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm#4

This is different to Zero Rated and Exempt sales, which are required to be included in the calculation of Flat Rate Turnover (Outside Scope is not the same as Zero Rated or Exempt).

3. In Solar Accounts, if you raise an invoice and classify it as either "Sale of Goods to Customer Outside EU" or "Sale of Services to Customer Outside EU" - the software is STILL including the item as revenue to be included in Flat Rate Turnover.

The implication is : Solar Accounts is raising a VAT liability for VAT payable to HMRC under the Flat Rate Scheme, for sales that should be treated as "Outside Scope".

I appreciate there is a treatment to select called "Outside Scope" however I think this is somewhat confusing? I think the correct selection should lead to the correct treatment?

I'd be grateful for your thoughts on this, as it is somewhat worrying and frankly I'd quite like to be wrong.

Last update - Solar Accounts only appears to make this error with the "Sale of GOODS to customers outside the EU" option. It doesn't do the same for the Services selection.

I'm not clear why there would be a different treatment, as guidance (copy pasted from the HMRC website) says:

"Goods and services that are outside the scope of UK VAT includes anything you:
- buy or sell outside the European Union (EU)'

It doesn't appear to discriminate between goods or services for the out of scope definition, unless I'm mistaken?

Sorry to have posted 3 successive updates, but I'm quite concerned I'm about to have to re-file multiple VAT returns to correct this issue manually.

Hi Angel,

Goods which are exported outside the EU are ‘zero-rated’ - see Section 2 of VAT Notice 703: http://goo.gl/hdNRWi

I think that ‘outside the scope’ would only apply if the goods were bought and sold outside the EU without passing through the UK.

Regards,

Thank you so much Mark, I really appreciate it.

This is one of those moments I was very much wanting to be wrong and I'm very pleased to hear I was. Of course it doesn't help that the HMRC guidance you quoted directly contradicts the HMRC guidance I quoted, regarding the same subject matter. It's no wonder people get this sort of thing wrong or confused.

I hope this post helps others, as it's helped me.

PS: Answering on a Sunday is above and beyond Mark, thanks a million.

A.

Hi Angel,

No problem - glad that helps. And yes I know how confusing the HMRC VAT advice can be!

Cheers,