ACCOUNTING FOR VAT ON EU DISPATCHES AND EXPORTS

ACCOUNTING FOR VAT ON EU DISPATCHES AND EXPORTS

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Hi everyone,

OK, I need you to put your heads together for this one as I am not sure why I am not getting this?

An internet based company is making supplies all over the world of goods comprising of sportswear and equipment.  They are registered for VAT in the following EU countries - Austria, Belgium, Denmark, France, Germany, Ireland, Italy, Netherlands, Poland, Spain and Sweden.

Currently, the data manager constructs a report which details each sale item by item with the order date and the shipment date and among a great deal of other information it includes the net sales, the shipment country, the rate of VAT applicable to the sale, the VAT amount and the gross sales.

After speaking with the management accountant last week, she advised me that essentially all sales are posted into Sage at the standard VAT rate of 20% regardless of where it was shipped or if it is zero-rated.  Once the sales report is completed at the end of the month all the VAT is cancelled out through a journal entry on:

1. Exports

2. Goods shipped to EU countries in which they are VAT registered

3. Zero rated items to the appropriate countries.

In theory, the sales VAT which is residual is the VAT on UK VATable sales and this 'mops up' any VAT which doesn't appear on the sales report, she tells me that this could be customer care taking extra money to ship something same/next day; someone selling something to someone and putting it through the PDQ but not the sales system, VAT on free of charge items sent to sports persons on which they are still liable to VAT.

The sales report comes out once a month (at the end of the month) and this is beyond her control, so I cannot ask that it is run daily, but does this make logical sense to anyone else as I have a copy of the sales report in front of me now and a copy of the most recent VAT return and for the life of me I cannot reconcile it.  Also, I am wondering what entries she is making to post everything including VAT at 20% as it is effectively a business with no debtors so the entries to post would surely be:

Bank x.xx  
Sales   x.xx
Sales tax a/c   x.xx

Am I talking rubbish or does this seem to be very odd?  Her reconciliations are nearly spot on but because I have not yet had an opportunity to view the Sage data I am working with half the information and cannot follow what she says is being done.

Does anyone have any suggestions to improve the way the sales are dealt with initially at posting stage?

Many cheers.

Replies (3)

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chips_at_mattersey
By Les Howard
22nd May 2015 08:28

Cross-border sales of goods

The methodology does seem odd. A taxable person does have a responsibility to account correctly for VAT on its sales; maintaining a system that actually accounts incorrectly, and has to be corrected every time is a real concern.

There must be a way to identify the correct liability at the time of sale. This will then lead, with some confidence, to producing, first time, a correct VAT report.

Thanks (1)
By Anthony.Evans82
22nd May 2015 08:40

CROSS-BORDER SALE OF GOODS

Indeed I would agree, but because the sales report is never quite accurate in as much as it misses the extra sales which I spoke about above, if the UK VAT was just taken from the sales report, then a lot would be missed.  Given the £8m turnover of the business, when the HMRC came out to inspect the VAT they only found an amount of £200 owing to them, which considering the above seems like an achievement.  They were happy with this method, but it just doesn't sit comfortably with me. 

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By maha05
05th Jun 2015 15:45

Hi, 

Hi, 

I'am Curious to hear about the outcome after you saw the monthly sale report. It's really an interesting case.

Thanks for sharing

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