The ‘reverse charge’ is an EU-wide agreement that applies to goods and services bought and sold between EU countries by VAT-registered companies.
There’s an agreement that UK businesses don’t charge companies based in the EU VAT, and that they don’t charge us VAT for services we buy from them, where the place of supply is in the EU. This is all done via the ‘reverse charge mechanism’.
That might sound fairly simple, so far. But with the reverse charge you don’t simply record these items as ‘No VAT’ in your accounting software. You’ve got to account for each transaction according to the requirements of the reverse charge mechanism, which can be confusing – for example, the Xero online accounting package includes options for Reverse Charge Expenses (20%), EC Sales Goods, EC Sales Services, EC Acquisitions (20%) and EC Acquisitions (Zero-rated) so you can account for your EU transactions in the right way.
If you need help with the reverse charge, give us a call on 01454 300 999, or drop an email to email@example.com