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Post Info TOPIC: what is a reversal charge?
bambinou


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what is a reversal charge?
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Hello all,

As explained in the other thread I will use the self invoicing system with my suppliers.
My accountant told me to write self invoices with 0% V.A.T when the suplpier is outside UK but in EC, he also told me (months and months ago) to do reversal charge from those 0% V.A.T.

Could someone explain to me what does reversal means please? and how to set this up in quickbooks 2008?


Many Thanks,


BamBam

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Wendy


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The VAT reverse charge works as follows where goods/services are purchased by UK VAT registered businesses from EU suppliers:
  • The supplier does not charge VAT on the supply, if the goods are to be used by the customer for business purposes.
  • The customer has to account for output tax on the value of the goods purchased by inclusion in Box 2 of the VAT return.
  • The customer can reclaim this VAT by inclusion in Box 4 of the VAT return, subject to the normal rules (i.e. that the VAT is used for taxable business activities).
  • The net effect of the VAT accounting is that the customer should be in the same position as if they had purchased the goods and paid VAT to the supplier.


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