web
You’re offline. This is a read only version of the page.
close
Skip to main content

Notifications

Announcements

No record found.

News and Announcements icon
Community site session details

Community site session details

Session Id :
Dynamics 365 Community / Forums / Microsoft Dynamics GP (Archived) / VAT Daybook & reve...
Microsoft Dynamics GP (Archived)

VAT Daybook & reverse charges

(0) ShareShare
ReportReport
Posted on by Eddie Lewis 25

Hello, I am a foreigner in your country and need some help.
I did not grow up in a VAT culture, but am in the position of setting up a set of books for a UK company (GP v9).
I have done enough research to where I think I now understand the VAT requirements fairly well.  I am getting hung up, however, in implementing the GP tools available.  I understand using the Tax Details and Tax Schedules, and easy enough to make that work and make the input and output taxes and the associated taxable amounts show up in reports in the right places for simple transactions, such as UK sales and purchases (I am using the VAT Daybook, and have updated it).
What has become a little mind-bending is something that is a typical transaction for this company: the purchase of extra-EU services.  I’m having trouble getting from Purchase Order (£0 of tax) to VAT report (tax amount reported in 2 places, and taxable amount reported in 2 others) as required.  According to the HMRC documents, for VAT purposes our company “must act as if you are both the supplier and the recipient of the services.”  And for any given Item / Purchase Order / Invoice the following report entries must be made:
-the amount of output tax in box 1 VAT due on sales;
-the amount of input tax in box 4 VAT reclaimed on purchases;
-the full value of the supply in box 6 total value of sales; and
-the full value of the supply in box 7 total value of purchases.
The Reverse Charge mechanism that comes with the VAT Daybook does not seem intended for, or adequate to, handling this particular job.  Or maybe I just don’t understand how to use it.
After burning many hours on this problem, I decided that there must be someone out there who has already noodled this one through and might be willing to share their expertise.

*This post is locked for comments

I have the same question (0)
  • Community Member Profile Picture
    Community Member on at

    Hi,

    The reverse change vat is relatively straighforward. First you need to mke sure that the country code in your company set up is correct. Go to Tools >> Setup >> Company >> Company and select 'GB' in the country code field of your main address. Then make sure that your VAT number is entered in the tax registration field of the same window.

    Then go to setup >> Company >> Tax Details.

    You need to set up 4 new tax details - 2 for sales and 2 for purchases.

    For the sales you can call the first something like 'S REV+' (Sales Reversing Positive)...set its type to be 'Sales' andset its tax percentage tobe the standard rate (in your case most probably 17.5%).

    The set up the second sales detail called say, S REV- (Sales reversing negative)...set this up as above, but make its tax percentage to be -17.5% (Minus 17.5%).

    Set up two for purchases as well: P REV+ and P REV- . Again using the positive 17.5 % tax rate and negative 17.5% tax rate respectively.

    Then go to setup >> Company >> Reverse Charge Setup. The window is self explanatory - you enter the four details you just set up. You also enter here the Threshold amount (the amount above which reverse charge tax will be calculated / reported) - check with your tax authority to find out what this is.

    On this window, there is also a button called 'Items' click this to open a list on your inventory items where you can select which ones are subject to reverse charge VAT.

    This works automatically for POP and SOP - in RM and PM you need to select the reversing tax details manually when you enter a transaction (since you are not including inventory tems on PM or RM).

    The whole point of this is to improove reporting statistical data for the EU. You don't pay VAT on these purchases, but you do recognise the VAT as a credit and as a debit on your tax return - (the net effect being nil) - the use of a positive and negative VAT amount on a transaction means that the net vat liability nets out to zero.

     Hope this explains.

    Check out my blog for articles on European VIES, Intrastat and VAT - localisation issues for GP in Europe.

  • Eddie Lewis Profile Picture
    Eddie Lewis 25 on at

    Thanks Ian for taking the time to go through that.  I think I understand the way that the reverse charge VAT feature works, or is intended to work.  My problem is that I don't think it covers a particular problem that I am trying to solve.  But there's a good chance that it has to do with my inexperience with VAT.

    Here is the problem:
    We as a UK company are purchasing software (classified as a service for VAT purposes) from a company outside the EU.  The VAT reporting requirements are as follows (from the HRMC literature):
    Normally, the supplier of a service is the person who must account, to the tax authorities, for any VAT due on the supply. However, in certain situations, it is the customer who must account for any VAT due. Although called reverse charge in this notice, the procedure may also be referred to as tax shift. Reverse charge is not a complicated accounting procedure. Where it applies to services which you receive, you, the customer, must act as if you are both the supplier and the recipient of the services.
    Both the supplier and the recipient.  This requires that a single PO to / Invoice from a Creditor actually should generate both a Sales and Purchase event, as follows (again from the HRMC literature):
    You simply credit your VAT account with an amount of output tax, calculated on the full value of the supply you have received, and at the same time debit your VAT account with the input tax to which you are entitled, in accordance with the normal rules.
    You then include in the relevant boxes of your VAT return:
      the amount of output tax in box 1 VAT due on sales;
      the amount of input tax in box 4 VAT reclaimed
    on purchases;
      the full value of the supply in box 6 total value of sales; and
      the full value of the supply in box 7 total value of purchases

    So it would appear that from this one single purchase we need to generate both a Sales and Purchase VAT amount and net purchase amount, 4 separate entries on the VAT report.  The reverse charge feature in GP is, I think, an either/or choice.  I don't think it's going to produce the required results, is it?

Under review

Thank you for your reply! To ensure a great experience for everyone, your content is awaiting approval by our Community Managers. Please check back later.

Helpful resources

Quick Links

Responsible AI policies

As AI tools become more common, we’re introducing a Responsible AI Use…

Neeraj Kumar – Community Spotlight

We are honored to recognize Neeraj Kumar as our Community Spotlight honoree for…

Congratulations to the November Top 10 Community Leaders!

These are the community rock stars!

Leaderboard > 🔒一 Microsoft Dynamics GP (Archived)

#1
mtabor Profile Picture

mtabor 1

Last 30 days Overall leaderboard

Featured topics

Product updates

Dynamics 365 release plans