Setup process - Reverse Charge VAT

 

 

 

The following procedure must be carried out before the functionality detailed under this heading can be made available to the user. These steps must be completed in the order given below:

1. Licensing

Project DA1407 must be licensed for it to become available.

 
2. System Keys
The system keys need to be set up as per the details in the System Keys section.
 
3. Master files (data records)

Add records for:

  • VAT Codes – Add a reverse charge and a standard VAT code. The VAT rate applicable to these VAT codes is also defined via this option - the VAT rate for the reverse charge VAT code can be defined as zero percent.
  • Item VAT Types – Add a VAT type for the products subject to the reverse charge VAT code.
  • Inventory – Assign the Item VAT Type to the products subject to the reverse charge VAT code.
  • Account VAT TypesAdd a VAT type for the trading account customers who trade in high value, portable electronic goods subject to reverse charge VAT.
  • CustomersAssign the Account VAT Type to the trading account customers who trade in high value, portable electronic goods subject to reverse charge VAT.
  • VAT MatrixAdd a matrix for the combination of Item VAT Type and each applicable trading account customer Account VAT Type. These VAT types are then used to calculate the VAT for a quotation (Telesales) or invoice using the appropriate VAT rate.

 

4. Enter a quotation or sales invoice
The quotation (Telesales) and sales invoicing functionality identifies the product lines to which the reverse charge VAT code has been assigned and compares the sum of these product lines, exclusive of VAT, with the de minimis defined in system key OPRCVAT@@@. Where the sum of these product lines, exclusive of VAT, is:
  • below the defined de minimis – the product lines are updated from system key OPRCVAT@@@ with the defined standard VAT code and, from the VAT Codes table, with the corresponding VAT rate.
  • above the de minimis limit before the application of any apportioned settlement or order value discount but below the de minimis after the discounts have been applied – the product lines are updated from system key OPRCVAT@@@ with the defined standard VAT code and, from the VAT Codes table, with the corresponding VAT rate.
  • above the de minimis limit after the application of any apportioned settlement or order value discount – no changes are made.

The update to the product lines is not displayed to the screen but occurs in the background after completion of the entry of the quotation (Telesales) or invoice and before the quotation or invoice is printed – the printed quotation or invoice reflects the amended values.

 
5. View results via printed quotations or sales invoices

For those:

  • quotations (Telesales) that include product lines to which the reverse charge VAT code has been assigned but where the sum of these product lines, exclusive of VAT, is:
    • below the de minimis defined in system key OPRCVAT@@@ after the application of any apportioned settlement or order value discount – the applicable product lines on the printed quotation show the standard VAT code and corresponding VAT rate. The VAT calculation and gross value on the printed quotation reflect the changes to the VAT code and rate.
    • above the de minimis defined in system key OPRCVAT@@@ after the application of any apportioned settlement or order value discount – no changes are made.

    This applies to quotations printed via the Telesales option Quotations Print. It also applies to Telesales quick quotations entered via the Telesales option Sales Orders and printed as an instant quotation, i.e. system key ATQUOTPRNT is set to allow instant quotations to be printed.

  • invoices that include product lines to which the reverse charge has been applied the invoice is printed with the amount of VAT due under the reverse charge rules in the invoice tail and the following text:
    "Customer to pay output tax of #### to HMRC"
    where #### is the calculated VAT amount.
System Keys Used
ATQUOTPRNT Allow an instant quotation print?
OPINSTINV Allow instant invoice production in invoice entry?
OPRCVAT@@@ Reverse Charge VAT Code and parameters.

 

Notes:

  • The supplier of high value, portable electronic goods subject to reverse charge VAT must include the total value of a reverse charge supply in their VAT return – there is no tax to reclaim because the VAT is the responsibility of the trading account customer.
  • VAT-registered trading account customers must show the amount of the reverse charge VAT on their VAT invoice and account for it on their VAT return for the period in which they received the goods.
  • The invoicing functionality within Contract Management (RB) and Project Billing (SB) does not calculate the reverse charge.
  • VAT inclusive items are handled by the quotations and sales invoicing functionality in the same way as products that are VAT exclusive. It is therefore recommended that items that are likely to be subject to the reverse charge are not set up as VAT inclusive items.
  • Where the invoice includes an order value or settlement discount, the de minimis rules are applied to the discounted value however project DA0514 - Extended discounts is not supported when calculating the reverse charge.
  • The sales order entry functionality is not included when calculating the reverse charge. This could result in differences in the values between a sales order and its associated sales invoice.
  • The trading account customer for a Telesales quotation or sales invoice can be changed at the end of the quotation or invoice entry. In this scenario it is possible that the trading account customer details will not be refreshed and consequently the VAT code might not reflect the correct VAT code for the trading account customer's account VAT type set up in the VAT matrix.