Changes to VAT legislation for the sale/purchase of selected products between two VAT registered UK businesses mean that the purchaser of the goods, rather than the seller, is liable to account for the VAT on the sale. The option for this procedure has been implemented in this update and is achieved through the use of an ‘R’ VAT Code.
Whilst the primary point of generation is likely to be Order Processing there are changes in various applications to support this requirement.
Reverse VAT in Use
Customer / Supplier Maintenance
As the ‘Reverse VAT’ option is only applicable between two UK VAT-registered companies then the system will only allow use of an ‘R’ VAT Code for companies with a (EC) Country Code of ‘GB’ and a non-blank VAT Registration No. If these conditions are not met then the use of the ‘R’ code during transaction generation and order entry is blocked.
NB: The default VAT code used on this screen should remain ‘S’ where appropriate and would rarely be set as ‘R’
Sales / Purchase Transaction Entry
With direct entry to the ledger the system will block the use of a ‘R’ tax code where the customer / supplier does not have a Country Code of ‘GB’ and a non-blank VAT registration no.
If use an ‘R’ VAT code for any analysis line then a pop-up will allow confirm of the Reverse VAT amount within the P/Ledger transaction entry.
If use of an ‘R’ VAT code is allowed but the total goods value associated with this code is less than £5000 on an invoice transaction then the system will warn and not allow you to proceed. Instead you must change the details to use the normal VAT codes and calculate the VAT amount.
On Credit and Invoice Adjustment entry whilst the £5000 limit still applies it is based on the original sale. If the original sale, being fully or partially credited, used ‘R’ VAT codes than the Credit can also use the ‘R’ code even when marked lines are less than £5000.
If use the ‘R’ code and the credit goods value is less than
£5000 then the system will pause to warn and ask if you wish to proceed.
If the original sale applied the ‘Reverse VAT’ option then you can choose to
continue. If respond ‘No’ then you are
taken back to the account code input to re-confirm and amend the details.
VAT Reports
The VAT Report for both the Sales and Purchase Ledger now includes an extra column for the ‘Reverse VAT’ amount (similar to the extra column for the EC Acquisition Tax in the P/L report).
In addition the Sales Ledger has an option for an additional report to create the Reverse Charge Sales List.This report gives a breakdown of the total goods sold to each VAT registration for the period / quarter.If reporting for more than one period (i.e. including the two previous periods) then the goods value is broken down into the individual periods.
The report parameters are as per the existing VAT reports but include an additional option to ‘Output Reverse VAT to CSV’. This option, when set, creates a file RCSLMMYY.CSV (where MMYY are replaced with the month/year from end date of current period) in the data directory (DFCOMP location). This file can then be picked up when filing the sales list to the HMRC.
Registering as a Reverse Charge Trader
A supplier must notify the HMRC within 30 days of making its first supply of a Reverse Charge product. Once a supplier has notified HMRC then they will be required to submit a Reverse Charge Sales List (RCSL) for each VAT period.
Suppliers must also notify the HMRC if they cease to make such supplies.
Returns – The RCSL can only be submitted electronically – either by completing a web form on the HMRC site, or by submitting the CSV file above.Options on the website allow for the CSV file to be picked up from the users’ computer.
Nil Returns – if a supplier does not make a relevant supply within the VAT period then they must make a nil declaration to the HMRC. This facility is available via the HMRC website (the HMRC have no plans for this option to facilitate a nil submission electronically).
Stock Maintenance
Affected products should be updated to use the ‘R’ VAT code instead of their current standard VAT code.The ‘Alternate EC Code’ should be left unchanged.
Sales / Purchase Order Processing
During Order Entry no changes are apparent other than the update of the ‘R’ VAT code for selected order lines.
As with direct entry the system will prevent update of an ‘R’ code where the country code is not GB and the VAT registration number is not blank. Where the ‘R’ code is updated to the order detail directly from the stock/product file then this code will be automatically replaced with the UK equivalent where use of ‘R’ is not applicable. Similarly, if the operator attempts to key in an ‘R’ VAT code, this will be rejected when not applicable.
It is during document production the goods value check is applied. After confirming the goods details are OK the system will calculate the goods/VAT totals for the document as a whole and for the ‘R’ flagged detail lines. Where the flagged lines are less than the £5000 threshold limit then, on confirmation of ‘All Order Details Completed’, the system will recalculate these totals after updating the order lines to the ‘S’ standard code (internally for the document only – the order lines themselves remain as ‘R’) before proceeding to prompt for delivery charge and subsequent print/update processes. Other than the display of these totals no user input is required.
For credits, either credit orders or credit against invoice, the procedure operates in a similar manner.In line with the principle of it being the original sale that is the key for use of an ‘R’ code then where the £5000 limit is not reached the system will pause and warn accordingly and ask whether to proceed and post the Reverse VAT charge.
If choose to proceed, the reverse VAT is posted on update of the ledger, if elect not to post the reverse VAT then the system updates using the standard VAT code/rate before continuing with the remainder of the document production.
On the document printout the system will only include the ‘Reverse VAT’ commentary text where the ‘R’ code is used.
On the Purchase Order Processing document front IF confirming VAT on a line-by-line basis (not total level) then if the order line uses an ‘R’ VAT code then instead of prompting for the standard VAT amount for confirm the system will prompt for the Reverse VAT amount instead.
Update to Nominal / VAT Form 100
The Purchase Ledger Update to Nominal will include an extra line journaling the Reverse VAT amount between the Tax Control A/C and the Reverse VAT A/C as specified in the NL System Profiles (all the tax control a/c’s are typically set for the same account).
This tax value will then be used to populate the sales tax (box 1) and purchase tax (box 4) values on the VAT Form 100. The goods value for Reverse VAT lines will update total value of purchase (box 7) as normal.
Support has been added to the Invoicer application (both Sales and Purchase documents) for Reverse VAT handling. However, Invoice Costing and Invoice Generator block the use of the ‘R’ VAT code.
Cashbook postings cannot use the ‘R’ VAT code either – if need to post such a value you should create a ‘dummy’ purchase account and add the invoice to this using the ‘R’ VAT code and then enter a payment against it in the normal manner.
Sales/Purchase Batch Update will allow import of the ‘R’ VAT code and update into the ‘Reverse VAT’ data item. The assumption is made, however, that the source for these transactions has applied the standard checking rules described above (VAT Registration Numbers set / £5000 limit check applied etc.)
Sales/Purchase Order Processing Batch Update will, assuming VAT code picked up from stock/product file use the ‘R’ VAT code set on the record but will substitute the alternate ‘S’ VAT code if the customer/supplier does not have the ‘GB’ country code and VAT registration number required.
Installation
Changes are required to the VAT table, together with the introduction of a new data item on the sales and purchase transaction files to record the reverse VAT, and document changes to print these details.
VAT Codes and Rates
A new entry on the VAT table is required for Reverse VAT goods. We suggest setting the details as follows:qCode = R
qTitle = Reverse VAT
qRate = 0.00%
qExempt = N
qEC-Tax = N
qUK-Equiv = (blank)
qReverse-Equiv = S (or usual Standard Rate VAT code)
In addition you need to set the prompt Reverse VAT Limit to the current limit of £5,000
Database Changes and Database Profiles
Two new fields are required – one on the sales ledger transaction file and one on the purchase ledger transaction file – to hold any Reverse VAT amounts.
File Item Name Type Description
SLT REVERSE-VAT K, L Holds the amount calculated for Reverse VAT goods.
PLT REVERSE-VAT K, L Holds the amount calculated for Reverse VAT goods.
The new items also need referencing within the Datafile Database Profiles. Trans Optional 3 for both the Sales and Purchase allows this new item to be referenced.
HoHHH
Nominal System Profiles
A new control account is available for the Reverse VAT in the Nominal System Profiles. This is used in the update to the Nominal from the Purchase Ledger to journal the Reverse VAT amount between this account and the Tax Control A/C. As with the Sales/Purchase/Acquisition VAT accounts this would typically be set to the same value as the Tax Control A/C
If using the alternate ‘Multiple Updating Definition File’ then this account must be updated within the definition parameters via the Application User Facilities for the Nominal Ledger.
NB: This is a mandatory account for the P/L update to
Nominal provided that a) a VAT code is configured with a Reverse VAT alternate,
and b) the ‘Reverse VAT’ data item is referenced within the P/L Database
Profiles.
Document Design
Changes to the SOP (and POP) Document Designs allow print of special text items where a Reverse VAT product is processed. This allows explanatory text to be printed such as:
‘Customer to pay Output Tax of £xxxx to HMRC’
Or
‘UK Customer to pay Output Tax of £xxxxx to HMRC’
Parameter Screen 6b of the Document Parameters (6a for POP
documents) allows entry of this detail.Select Screen 6 from the ACTION button and then press <Page-Down>
to move to screen 6b (6a).
Two separate lines of text can be configured to print for
use as you desire. Suggested phrases are
displayed (for SOP documents) and you can use two special ‘character codes’
within the text which are updated during print.These codes are:
q*A* - is updated with the VAT Output Tax for affected goods.
q*C* - is updated with the VAT ‘R’ Code for affected goods.
You can set the line/column and font from this screen but, once the text is set, you can also position these items from the mask using the ‘Document Totals’ data item category and the bottom two options for Text for Reverse VAT Charge (1) and (2).
The document design for the Invoicer application offers the same settings as above.
Sales Ledger Application User Facilities
Configuration settings are required for the Sales Ledger
report ‘Reverse Charge Sales List’ via the Application User Facilities. A new fourth report screen is added to the
‘Transaction Reports / Tax Control Reports’ option that allows configuration of
the sales list report.
Print Control –
set for the Standard 80-column print style (usually Style 1)
Data Items – whilst up to ten items can be configured for print, the only options required are the (EC) VAT Registration Number and the transaction amount field.
Options – you can set the OPTIONS print parameters for ‘new-style’ report printing formatting as required.
Menu Design
A new option for the ‘Reverse VAT Sales List’ is required within the Sales Ledger VAT Reports menu (typically SLVAT.D03). The details are:
Program / Application = P-Program
Program = SL.EXE
Parameter = 5604
Article ID: 259
Created On: Wed, Jun 13, 2012 at 10:57 AM
Last Updated On: Wed, Jun 14, 2023 at 5:27 PM
Online URL: https://kb.datafile.co.uk/article/reverse-vat-charges-for-mobile-phones-and-computer-chips-259.html