Hi. I have a client, UK based customer, providing IT software development services to a UK based customer (charges VAT on the supply). They sub-contract some of the IT development work to a business based in India. My question is how do they account for the VAT on the services they have bought?
My thoughts are that this is "reverse charge" therefore the amount charged goes into Boxes 6 & 7 with the notional VAT in boxes 1 & 4 (based on my reading of VAT notice 700/12, section 4.6).
My software (Sage One) suggests boxes 6 & 7 only.
I appreciate that this has no effect on the amount of VAT my client pays but, in my opinion, does have an impact on the chances of the client getting a VAT inspection (as these purchases form quite a high proportion of the overall figures).
Any VAT experts (or Sage One programmers) want to comment?