When you buy services from an overseas supplier, you don't pay import VAT. Instead, you declare the VAT on your VAT Return using reverse charge.

We automatically apply the reverse charge to ensure the VAT records accurately on the return.

Before raising reverse charge VAT invoices you must ensure the supplier has the correct address, and has a VAT number entered.

For guidance, read create a supplier contact. For existing supplier contacts, read edit and manage suppliers. 

Recording the purchase invoice

1. Go to Purchases and choose Purchase Invoices.
2. Select New Invoice.
3. Choose the relevant overseas supplier record.
4. Select a service from the list on the first invoice line or enter a Description.
5. Select the relevant Ledger Account and enter the price.
6. From Goods/Services select Services (standalone).
7. Select the VAT Rate you use when buying the same service in the UK. 
   
   NOTE:

   The VAT* value shows as zero, but the reverse charge still displays on the VAT Return.

8. Select Save.

How a reverse charge transaction appears on the VAT Return

The VAT records both a sale and a purchase on your VAT Return, effectively cancelling each other out.

If you've selected Standard or Lower Rate, the VAT amount shows in:

• Box 1 - VAT due in this period on sales and other outputs
• Box 4 - VAT reclaimed in this period on purchases and other inputs

The net amount shows in:

• Box 6 - Total value of sales excluding VAT
• Box 7 - Total value of purchases and all other inputs excluding any VAT