EC Reverse Acquisition Purchases

May 10 2017, 0 Comments

The most regular bookkeeping mistake relating to VAT that we see is incorrectly accounted for EC Reverse Acquisition Purchases.

What are they?

If you are a VAT registered company and when purchasing either Goods or Services from a company in the EC and you have supplied your VAT number and the company did not charge you VAT.  But, stated on their invoice to you that "supply VATable where received (ART.196 Directive 2006/112/EC)" or words to that effect.

Broken down into simpler English this means that you have not been charged VAT and should show this EC purchase on your next VAT return.

How do I show this in my accounts?

In Business Accountz Startup+VAT or Suite then you need to account for it by making two purchase transactions. These can be entered using the Easy Steps (especially designed to avoid confusion).

The example used here is for £24.00 purchasing Goods from the EC Zone.

Click on the Easy Steps icon > Purchases > Buy Goods from the EC Zone follow the wizard but remember to select a supplier and then enter their VAT number.  Once the wizard is complete you will see these two purchase transactions:


EC Purchase

If you prefer not to use the Easy Steps you should enter the two transactions as above.

The first transaction shows that you would have been charged VAT at 20% but, because you supplied your VAT number no VAT was charged and you reverse this amount with transactions number two.

If you have been charged VAT on an EC Purchase this is not the method for recovering the VAT please see here for more information on refunds for UK businesses.

The boxes affected on your VAT return are different depending on whether you have bought Goods or Services:

Goods affects boxes: 2, 3, 4, 7 and 9

Services affects boxes: 1, 3, 4, 6 and 7

Though there is no effect on box 5 but you will be reporting EC reverse acquisition purchases correctly.

Please email if you have any questions.