VAT return - box 7 value

[KalnzEB]

Hi.

I`m a bit confused about VAT return box 7 which says "total value of purchases and all other inputs excluding any VAT."

I understand that I need to write the total amount of purchases (input) excluding VAT. But what if I have records like bank account monthly charges or eBay fees from which I can`t reclaim VAT. Do I need to include these records in box 7 total value or only values with VAT from which I can reclaim VAT?

Thank you.

 

[UK Contractor Accountant]

My view is that you bung all business purchases and exoenses in box 7 irrespective of whether it's a exempt supply or outside the scope of VAT.

Not much attention is paid by VAT inspectors on the contents of box 7 other than a statistical check the vat claim back does not exceed 20% of box 7 value.

 

[TimCaprica]

What you often find with accounting software that prepares the VAT for you is that they only put the VATable items in box 7. So Box 4 is nearly always exactly 20% of the Box 7 (unless there are some 5% transactions).

I'd agree with the above though. As long as box 4 doesn't exceed 20% of box 7. HMRC are probably not going to pay much attention.

 

[KalnzEB]

Many thanks for replies.

 

[Aurelia]

Do you know if business that cannot reclaim VAT on supplies purchased to make exempt sales need to include something in box 7 on the VAT return?

 

[UK Contractor Accountant]

Box 7: total purchases excluding VAT

Enter the total figure for purchases (excluding VAT) for the period, including:

• the net value of purchases made by the business (taxable and exempt purchases)
• any services purchased from overseas vendors where the UK reverse charge mechanism needs to be applied
• MTIC reverse charge transactions
• any amount put in Box 9
• special accounting scheme for gold transactions
• purchases made under the margin schemes applicable to certain supplies of goods within the UK (include the full purchase amount)
• net value of any imported goods where the VAT amount has been included on Box 4on the return (the business should manually calculate the net value of the imports if it is likely the original purchase invoice issued by the supplier would have been included on a separate VAT Return)

Do not include:

• expenses like salaries and taxes (such as PAYE and National Insurance contributions)
• motor vehicle license duty, MOT certificates and local authority rates
• VAT itself
• money put into and taken out of the business
• loans, dividends and gifts of money
• insurance claims
• income which is outside the scope of VAT because it is not consideration for a supply (eg certain grants and compensation payments)
• Stock Exchange dealings (unless the business is a financial institution)

 

[Aurelia]

Hmm I'm a bit confused.
When the business receive services from overseas supplies to which reverse charge apply, the value of the purchases re reverse charge need to be shown in the box 7 even if the business cannot reclaim VAT back on purchase as only make exempt supply. So, in this case, I need to fill in the box 1, 6 and 7 or only box 1 and 6? I know that business that make only exempt supply can't be register for VAT, but when the value of reverse charge supplies received outside the UK breached the registration threshold, the business need to be register for Vat and I would like to know if I need include something in Box 7 as BOX 4 will be zero.

 

[Lavender2306]

Hmm I'm a bit confused.
When the business receive services from overseas supplies to which reverse charge apply, the value of the purchases re reverse charge need to be shown in the box 7 even if the business cannot reclaim VAT back on purchase as only make exempt supply. So, in this case, I need to fill in the box 1, 6 and 7 or only box 1 and 6? I know that business that make only exempt supply can't be register for VAT, but when the value of reverse charge supplies received outside the UK breached the registration threshold, the business need to be register for Vat and I would like to know if I need include something in Box 7 as BOX 4 will be zero.

Hi Aurelia,
The previous comment by CA which is a quote from HMRC's VAT notice tells you that the reverse charge services should be included into box 7(see the second from the top in the list).

 

[Aurelia]

Many thanks.

What should I do with the purchases on which VAT is normally charged by supplier but business cannot claim VAT back as purchase relates to exempt supply? This still need to be included in box 7?

 

[Scalloway]

As far as I can find Box 7 should show all figures net of VAT.

 

[Aurelia]

Many thanks for your help.

 

[Lavender2306]

Many thanks.

What should I do with the purchases on which VAT is normally charged by supplier but business cannot claim VAT back as purchase relates to exempt supply? This still need to be included in box 7?

I think you are making a good point.
Generally, all taxable purchases should be included in the box 7, net of VAT. However, if you are registered only because of the reverse charge supplies, but otherwise you are fully exempt, then you don't include the VAT on reverse charge supplies into box 4 and accordingly you don't include in box7 any purchases on which you don't claim VAT . Thus if you supply only exempt supplies then your box 7 value should be nil.

 

[Aurelia]

I think you are making a good point.
Generally, all taxable purchases should be included in the box 7, net of VAT. However, if you are registered only because of the reverse charge supplies, but otherwise you are fully exempt, then you don't include the VAT on reverse charge supplies into box 4 and accordingly you don't include in box7 any purchases on which you don't claim VAT . Thus if you supply only exempt supplies then your box 7 value should be nil.

Could you please provide any article which can confirm that? I spoke with HMRC and they told that I should include net value of purchase in box 7 even if we cannot claim back vat on purchases.

So now, I am a bit confused....

 

[Newchodge]

Who was it said, on another thread, that VAT was simple? @atmosbob

 

[Lavender2306]

Could you please provide any article which can confirm that? I spoke with HMRC and they told that I should include net value of purchase in box 7 even if we cannot claim back vat on purchases.

So now, I am a bit confused....

Aurelia,
I don't have any article to refer to.
My assertion was based on the fact that if you are vat registered only because of reverse charge purchases and otherwise you are fully exempt business, then you can't claim vat on those purchases.
However on reflection with regards to box 7, I was wrong and you should do what HMRC says, I.e. include all purchases in box 7, net of vat . Any doubts see VAT notice 700/12.

 

[Aurelia]

Many thanks Lavender2306.

 

[lesvatadvice]

Aurelia, don't over-think this issue. As stated above, as long as Box 4 is less than 20% of Box 7, HMRC will take little notice. The basic principle is: include all costs and expenses, except those that HMRC tell you to exclude.
I have asked detailed questions of HMRC about irrecoverable VAT, etc., and they don't know the answer either!
And, I have also never come across a situation when HMRC have penalised or even warned a taxpayer about a Box 7 error.