Re: EU VAT

[Nigel Titley <..hidden..>]

On Mon, 2011-08-08 at 16:34 +0100, lrspares45 wrote:
> On Mon, 2011-08-08 at 07:59 -0700, Chris Travers wrote:
> > Hi;
> > 
> > How many here have to report EU VAT?  How do you track tax rates and
> > do your reporting?
> 
> Each country has it's own VAT rate, so for the UK I just set the current
> rate in taxes, and use the 'start date' for changes. This seems to work
> ok.

Yes, this works fine. And is the very simplest case.

> If sending goods to other EU countries, UK VAT is charged at the usual
> rate, unless the customer provides a VAT number, in which case the goods
> are supplied VAT-free, but sale has to be recorded on a supplemental VAT
> form. This turns up if you put anything other than zero in the 'Supplies
> to other EU countries' box, which is for VAT free supplies where a VAT
> number has been supplied. I just recorded these by keeping the printed
> invoices in a separate file! Purchasing from another country I'm not

Yes, this is called the ECSL form. I make enough of these that I have a
perl script that crawls the LedgerSMB database and generates a file of
the appropriate format to directly load up to the online submission
system.
  
> sure about, as I never have. You can claim back the VAT paid in the
> source country if you have paid it, or you have to pay VAT at your local
> rate if you provided a VAT number to be exempted.

Purchasing from another EU country is a little odd. You can't claim back
VAT paid in another country... ever... and the taxman will string you up
by your heels if you try it. However, if you quote a valid VAT number to
your supplier then they will supply it VAT free. You may think this is
the end of it, but no. You have to account for the VAT you didn't pay by
charging it to yourself and then claiming it back, at the local rate.
This is the "reverse charging scheme". I handle this by creating another
tax class "Reverse VAT" and charging normal VAT + reverse VAT on the
appropriate transaction. 

Purchasing from outside the EU is fairly straightforward. VAT is paid on
the goods' entry into the country, usually to the shipping agent. This
can then be claimed back, as per usual, at the end of the quarter. Every
month the taxman sends you a list of incoming payments which you then
need to match up against your claims. If they miss one, then too bad,
you can't claim it back.

> 
> VAT is payable every three months, i.e. quarterly. The details are here
> http://www.hmrc.gov.uk/vat/managing/returns-accounts/completing-returns.htm
> 
> and you should be able to down-load the form from that site.

But you will shortly *have* to complete your return online.

> There is a flat-rate scheme for those that choose that option, details
> here
> http://www.hmrc.gov.uk/vat/managing/returns-accounts/fat-rate-returns.htm 
> 
> The VAT people are actually amazingly helpful, they may even send you
> assorted booklets if you ask them.
> 
> Records have to be kept for 7 years (under pain of death). Errors, under
> Â10,000 I think, can be sorted out using the normal form, but bigger
> ones require a call to the VAT man.

Â2000, but they are actually quite helpful as long as *you* make the
declaration. If *they* find out then they are a lot less helpful and you
end up playing games along the lines of

taxman: we think you made a mistake
me: what is it?
taxman: we can't tell you. Can you guess?
me: No, it looks alright to me
taxman: we still think it looks wrong. Guess again

etc

> 
> People get really excited about VAT, but for most businesses it's really
> simple. Accounting software tends to present the numbers at the press of
> a button at the quarter end (nice, but not essential), but it's simple
> to do with LedgerSMB reports anyway.
> 
> Goods being permanently exported out of the EU are VAT free.
> 
> As far as I'm aware, all EU states work in the same way.

Yes, VAT is conceptually simple, however we make far too many VAT free
supplies to EU countries to simply keep the invoices in a separate file
and likewise we make a lot of supplies outside the EU altogether.

We keep 3 sales accounts (using the patch that Chris did for us): UK, EU
and Export sales and we associate each customer with one of the
accounts. Hence at quarter end all we have to do is look at the sales
for each account and this enables us to directly read off the sales for
each class of supply. It is very convenient and anything else would be a
real step back for us. It was sufficiently important to us that we paid
for Chris to develop the facility and asked for it to be folded back
into the main source, as we couldn't see where it would inconvenience
anyone who didn't want to use it (if you don't use it, it just defaults
to the basic behaviour of having one sales account for everyone).

Nigel