Reverse Charges in Accounting Systems

[fomayof928@mowline]

n missed, perhaps because the VAT invoice is not necessarily obvious


Reverse Charges in Accounting Systems
Ideally, businesses should use the appropriate tax codes in their accounting system so that transactions are appropriately tagged and the system automatically ensures that the VAT flows to the Output VAT and Input VAT boxes on the VAT return. If your system does not have this functionality and you are unable to implement it, it is recommended that you generate a VAT return for purchases that shows the supplier location so that transactions that may be subject to reverse charge VAT can be easily identified.

Training the AP team
APs will often be on the front line deciding whether or not to reverse charge estonia phone number example a purchase. It is therefore only fair that they have the knowledge to make this decision. Decision trees are a useful tool for AP teams as they help them determine whether or not a particular transaction they are reviewing should be subject to a reverse charge. This should be incorporated into regular (annual) VAT training for AP teams and new entrants should also be encouraged to review the guidance.

Reverse charge of VAT and sales
If a business provides B2B services and has overseas customers, it is likely that VAT will not be charged. If the business is based in the UK, it is helpful to include a note on the invoice that reverse charge applies (within the EU this is mandatory and is stated with the customer via the registration number). From a UK (and EU) VAT perspective, the criterion for not charging VAT on cross-border services is that the customer is in business, and the best evidence of this status is considered to be the customer’s VAT registration number. Ideally this should be shown on the VAT invoice and should be kept as part of the customer master data. For example, alternative evidence of business status can be obtained for business customers who are exempt and therefore not registered for VAT. However, not-for-profit customers should be treated with caution - although they may be registered for VAT and therefore have a mechanism in place to account for reverse charge VAT, the real test is that they are purchasing services for you for business purposes, rather than for non-business purposes, and that reverse charge is applied to your invoice.