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How to handle input vat when using royal mail ddp

Vat reporting for eu sales

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We sell b2c to various eu states and now use  the Royal Mail which uses the ddp service- how do I handle the different inputvat sales for these different countries, or should it be zero rated ?, Im so confused with the new rules, a little help would be appreciated!!

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By Jason Croke
21st Jan 2022 09:44

Input VAT is on purchases, but I think you are asking about output tax which sales.

If using Royal Mail DDP, they pay the import VAT when goods enter the EU, Royal Mail then recharge that back to you. You cannot reclaim this VAT. What you should be doing is charging your EU customs VAT based on their location, so you charge French customers French VAT, German customers German VAT, etc.

This VAT you collect from your EU customers, is nothing to do with HMRC/UK VAT return. You collect the VAT from the customer so that when Royal Mail recharge VAT to you, you have the money already from the customer, so paying Royal Mail is VAT neutral.

The sale you make to EU customers is still UK turnover, so for these EU sales, treat as zero rated exports, record the sale in Box 6 (net) and Nil VAT in Box 1.

Getting this wrong could cost the business (ie, if you're not charging foreign VAT to foreign customers) and also compliance issues, so do speak to your Accountant, once this is set up properly, it should then work well without much further effort.

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By Wilmo3
22nd Jan 2022 17:42

Many thanks for your help - you have great knowledge and explained this really thoroughly.

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