Purchasing services from an overseas business (UK)

When you buy services from overseas, you don't pay import VAT, but you must declare it on your VAT Return using reverse charge VAT.

We automatically apply the reverse charge to ensure accurate VAT recording.

• Check the supplier contact record
  Include the correct country on the address and add a VAT registration number
• Record the purchase invoice
  For each item line, select the Services (standalone) indicator and the VAT rate when buying the service in the UK

 TIP: Find out more in HMRC's guide to reverse charging VAT.

Check your supplier contact record

Make sure your supplier record has the correct country and a VAT registration number set on their supplier record.

1. From Contacts, choose Suppliers and then the relevant supplier.
2. From Addresses, select the correct country, such as Ireland.
   
3. In Options, enter the Supplier's VAT number.
   
4. Save your changes.

Record the purchase invoice

1. From Purchases, choose Purchase Invoices, and then New Invoice.
2. Choose the relevant supplier record.
3. Select a service from the list on the first invoice line or enter a Description.
4. Select the relevant Ledger Account and enter the price.
5. From Goods/Services select Services (standalone).
6. Select the VAT Rate you use when buying the same service in the UK. Although the VAT amount shows as zero, it still gets recorded on the VAT Return.
7. 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 have 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

 NOTE: Exempt services appear only in Box 7.