Sage VAT - EC Purchases when exempt supply

Felix Leiter
Felix Leiter Registered Posts: 2 New contributor 🐸
in General accounting discussion
I currently work for a company that is VAT exempt and purchases goods from other EC countries. I am trying to work out how to have Sage Line 50 calculate the reverse charge VAT correctly, as using VAT code T8 it enters VAT to be reclaimed on purchases (box 4) in the return, however the company can't reclaim this VAT. Is there a way to prevent this or even to manually correct it?

Comments

  • Gem7321
    Gem7321 Registered Posts: 1,438 Beyond epic contributor 🧙‍♂️
    Are you sure that reverse charge applies here?

    I use T7 for EC purchases but Sage does not calculate any VAT due with this tax code and I adjust manually before I submit the VAT return. If Sage is automatically calculating VAT due when you enter the T8 tax code and putting a figure in the VAT column you should be able to overtype this with a 0.

    If it is a reverse charge then I think the tax code is in the T20 region.
  • Felix Leiter
    Felix Leiter Registered Posts: 2 New contributor 🐸
    Yes, I am certain the reverse charge applies as we are an Irish company purchasing goods from the UK, the UK supplier invoices us with no VAT.

    When using T8 for a UK company I have it linked to tax code T1 which is the default 20%, this works fine for the UK company as they can reclaim input VAT. The Irish company is exempt so can't. I could adjust it manually but I would need to charge it to the P&L as an expense and this could be over several cost codes. I was hoping that Sage would have an option for this to save time on manual adjustments, perhaps that would be too easy!
  • Gem7321
    Gem7321 Registered Posts: 1,438 Beyond epic contributor 🧙‍♂️
    Reverse charge only applies to services and a fairly small number and very specific goods so I'm quite surprised to be honest! So is the UK company treating it's supplies to the Irish company as an EC Sale? I'm not sure this is correct as an EC Sale only occurs when supplies are made to a 'taxable person' and as the Irish company is exempt it may not qualify for zero-rating. I would have thought that the UK company should be charging VAT as a domestic sale and you would have to take the gross amount as the purchase price and disregard the VAT. In all honesty I'm not sure, hopefully someone else can help otherwise it may be a technical query for the tax office.

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