Easily submit EC Reverse Acquisitions and Flat Rate VAT

September 30 2015, 0 Comments

This is text taken from VAT notice 700/12 'How to fill in and submit your VAT return'.

VAT notice 700/12

Box 4 Total input VAT

"If you use the flat rate scheme you do not normally make a separate claim for input VAT, including any VAT on imports or acquisitions, as the flat rate percentage for your trade sector includes an allowance for input VAT."

"However, you can recover VAT on any single purchase of capital goods of £2,000.00 or more, including VAT, and VAT on stocks and assets on hand at registration. For details, see Notice 733 Flat Rate Scheme for small businesses."

"You should also use this box to claim Bad Debt Relief and to account for reverse charge transactions (see paragraph 4.6)".

4.6 Reverse Charge Accounting

“Under the reverse charge procedure, the purchaser of the goods or services, rather than the seller, is liable to account for the VAT on the sale”.

What does this mean to Business Accountz customers?

If you are purchasing either goods or services from the EU and have provided the supplier with your VAT number so that they do not charge you VAT then you should be paying this VAT to HMRC.

In the example below the company has paid £100.00 for advertising to an Irish registered company and has supplied their VAT number so no VAT was charged at source.

You can either enter this transaction in the easy steps by going to Easy Steps>Purchases>Buy Service From EC Zone and following the wizard or enter the transactions straight into Purchase Transactions. Either way you will have the following entries in Purchase Transactions:


You will now need to add another transaction to include this VAT on your VAT return. Press the plus icon and date the transaction the same day and relate to the same supplier, the From Account for this transaction needs to be the same as the previous transactions To Account in this case Advertising and Marketing, you will not be able to select this from the normal drop down list so please click on New Account which will open the Account Manager.

Open the Equity Group>Profit and Loss Group> Expense Group and locate this account and click Select. Because every transaction needs both a From and To Account please select ANY account for the To Account (this account will not have any amount of money charged to it). Please enter the Total Amount as -20.00 (note the minus) and select the VAT code to ALL VAT. The transactions should now look like this:



The effect of the above is that you will now show in your books the cost of the purchase including VAT as you normally do for UK purchases. You VAT return should now show as follows:


Everything is now ready to be submitted through our online submission system.