View Full Version : VAT on intermediary services.
08-29-2003, 03:52 AM
Since I just updated to the (hopefully) more VAT workable version, now would be a good time to ask for advice.
I'm a manufacturers agent representing several EU companies in the UK and also in Germany. My income is derived from a percentage of their sales and I invoice those companies every quarter. I'm told by the VAT office that these invoices should not be included on my EC Sales List, nor should they show in box 8 of the VAT 100. They should however show in box 6.
Can anybody suggest how to set up QB Pro to do this reliably?
08-29-2003, 11:53 AM
What happens if you use standard VAT codes - S or Z - on their invoices, rather than EU codes?
08-30-2003, 02:08 AM
I don't know..... that's why I posted the question. I get pretty confused even when I start trying to decide if I should apply Z or E to transactions that warrant them. If I apply S, invoices will show 17.5% added on - which would be wrong because they're EU. Using the standard EU code, they show up in box 8 - which is wrong. If I apply Z, will they show up in box 6?
08-30-2003, 02:56 AM
Our GST is a bit different to VAT, so what I say may or may not be appropriate for the UK. In Australia, this is how we would treat it.
The Sale belongs to the Manufacturer, not to you. Therefore any tax implications are between the manufacturere and the final purchaser. However, if you are acting as an "agent" for the manufacturer, you are able to issue a tax invoice on your stationery - but on behalf of the manufacturer. He then gets a copy of this and enters it as if he was issuing the invoice. The Invoice you issue does not get posted to sales, but to a liability account (no tax implications for you at this point). You then invoice the manufacturer for your commission on an invoice.
Now, there are difficulties in QuickBooks with doing all this, but if this is along the right lines, it is possible to make it all happen.
08-30-2003, 03:35 AM
Thanks for your comments. The taxes are obviously similar but maybe you don't have the complication of trading with EU members? I don't raise the invoices in question to the goods recipients - that's all done by the manufacturers. I only invoice for my commission. It's the detailed handling of the thing which I'm trying to sort out. In pevious VAT returns I just manually adjusted the form by deducting the appropriate amount from the VAT100 box 8. Now I would like QB to do the job for me.
08-30-2003, 04:15 AM
I'm not sure what you're correct route is. My understanding, for what it's worth, is that if the place of supply of your services is within the UK, and the VAT inspector doesn't want this to show up as an EU supply, then (s)he may mean that you ought to be adding VAT to the invoice as an ordinary UK invoice, even though the invoice address is EU. Otherwise your VAT return figures are not going to look sensible, are they?
Maybe you should consult your local VAT inspector again - I find they're very helpful if asked advice on correct procedures. Please share your conclusions with us - I think you may be in 'special VAT code' territory if these invoices have to be isolated & reported separately.
08-30-2003, 05:38 AM
Your other trouble about deciding which VAT code: there are a stupid number of exceptions, but work on the following rule and you won't go far wrong:
Assume it's S unless:
It's a specific class of supply or service which is Z (potentially subject to VAT but at zero rate in the UK) - books & publications are the common ones.
It is E - exempt. This is usually because it's subject to a different type of tax - insurance, wages, vehicle MOT fees, bank interest & service charges are the obvious ones.
Blank VAT code - "Outside the scope of VAT" - customs excise & duty, dividends.
VAT inspectors will not get hot under the collar if you get the Z/E/blank distinction wrong - they don't always agree between themselves on these - so long as you get S where it should be!
I attach a document I created a couple of years ago after a long conversation with a VAT inspector.
08-30-2003, 06:17 AM
Thanks, everyone, for responding. I talked to the VAT office only yesterday. I'm invoicing companies who are in Italy and Germany, for commission I earned. Forget where the original sales were made - it's irrelevant. On the VAT100 return, these invoices have to show up in box 6 - The total value of Sales box but not in box 8 - the Total value of supplies to the EU. Because it's a service, they don't want it to show in my EU sales list.
There's no VAT chargeable to the companies I work with because they're in the EU so the VAT code can't be S. Maybe it's Zero or Exempt. Maybe it's Euro-E or Euro-Z! I'll try to clarify that one with the office on Monday. Will keep you posted.
08-30-2003, 09:23 AM
If your supplying good to an EU company and you have their VAT number then you can use a QB Euro Vat code. If you have a euro code set at 17.5% but with the eurcode box ticked then QB then checks you have entered a VAT number for your customer and if you have it zero rates it even though it is really a standard rated item. Yes it confused me for a while as QB dont exactly explain the detailed behaviour well. QB then puts the correct numbers in the correct boxes on the VAT 100. If you just enter the transaction with a code of Z it will get the VAT amount right on the VAT 100 but wont include it in the euro sales total.
This works fine but what caught us and prompted a visit from HMCE was that if we are talking about selling services (as opposed to goods) to the eu then it is zero rated in the same way but it isnt included in the euro sales box. I think the correct effect is achieved by using a code Z - I have set up a special EZ code without the EC box ticked so I can distinguish these items later.
A service performed in the UK is always S (eg a training course in the UK attended by eg Irish/French customers) - The EU customers have to pay the VAT and claim it back in their own countries(if eligible) - They tend not to like this and often quote mistakenly that "We are Irish/Italian/French we dont have to pay VAT" which leads to arguments and part paid invoices.
There is an excellent page on the HMCE web site which lays down methodically all the different cases.
Although QB2003 has now had an update (R6) it still seems to be a bit quirky on handling EU vat codes - care is needed.
09-01-2003, 10:06 AM
Having consulted my local VAT office again, it seems that an EZ code is the right thing - which I've now added. I note your comment that it should not be marked as an EU code. Presumably that keeps the amounts out of the EC sales total. Will find out in two weeks time, when I make up my return, if it works for me.
Many thanks, everybody, for the comments.
09-01-2003, 10:17 AM
I have found by experience you need to be a bit careful when it comes to asking the VAT office questions about the actual software as not many of them understand the details of how QB works and will somes times just say yes to whatever you asked. Depending on what your selling EZ would only be appropriate if selling something which is zero rated in the UK such as books. If not the correct way is to use ES with the EC box ticked and a vat number entered for the client. This will then in effect zero rate it but QB knows it is really a standard rated item which can effect what appears in other boxes on the VAT return.
09-01-2003, 11:42 AM
We're talking about a service here. Earnings based upon commission from acting as an agent between various EU states.
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