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Introduction to Reverse Charge VAT

29th Jan 2014
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Aquilla_highres

A Cloud-based ERP solution for mid-market organisations

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With the latest release from Aqilla, the VAT report has been enhanced to support the reporting of Reverse Charge VAT if it is applicable to your business. 
 

The reverse charge provisions are a simplification measure to avoid the need for suppliers to register in an EU Member State where they supply their services. Normally, it is the supplier of a service who must account to the tax authorities for any VAT due on their supplies. However, for certain services, where the recipient belongs in an EC Member State and the supplier belongs in another country, the position is reversed and it is the customer who must account for any VAT due. This procedure is referred to in this manual as ‘reverse charge’ but it is also referred to by some people as ‘tax shift’.

Accounting for VAT using the reverse charge procedure is not a complicated procedure in accounting terms. Instead of being charged VAT by the supplier, a UK business customer who receives any of the relevant services credits his VAT account with the necessary amount of output tax as if he had supplied the services himself and at the same time debits his account with the amount of input tax to which he is entitled under the normal rules. The practical effect of this is that there will be no net tax payable on the transaction except by businesses which are not entitled to full deduction of input tax, such as those which are partly exempt.

When services are purchased within the EU, and the VAT on the purchase is recorded at zero rate, the standard rate of VAT should be reported in both Box 1 and Box 4 of the VAT 100 report. To support this functionality three additional parameters have been included in the VAT Rate Edit function and the VAT Detail Enquiry has been enhanced to show as a separate section the breakdown of the purchase invoices that are applicable to the Reverse Charge VAT.
 

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Aqilla is a modern, Cloud accounting solution designed specifically to suit the demands of mid-sized businesses.  Aqilla takes a smart and uncomplicated, document-centric approach to accounting.  Although Aqilla is straightforward to use and to deploy, the analysis options are almost limitless.  The software comes with; Sales, Purchase and General Ledgers, Cash Matching, Sales and Purchase Order and Invoicing, Timesheets, Expense Processing, Project Costing and Budgeting.  Cloud-based Aqilla is available from as little as £50 per user per month.

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