Google Addwords - Reverse Charge & Vat?

[Ali123]

Hi all,

Just printed the VAT invoice which relates to the google addwords I paid for earlier on.

On the bottom of the invoice it says: Services subject to the reverse charge - VAT to be accounted for by the recipient as per Article 196 of Council Directive 2006/112/EC

Does this mean i have to manually add the vat amount and declare it on the VAT return?

So if I paid £50- for google addwords, i have to manually type in £10 for the vat?

Is the rate i have to work with the uk rate of 20%? or the rate where google is based?

Confusing, why they have to make things difficult for.

Thanks in advance.

Ali

 

[Scalloway]

Reverse charge means that you add the £10 of VAT to your sales VAT and you add the £10 of VAT to your purchases VAT. The net effect is zero. You use the UK VAT rate.

 

[Karimbo]

if you are VAT registered and supplied your VAT code to Adwords then the invoice will not have any VAT on it. Google is registerred in some EU country and VAT is deducted at source of intra EU transaction.

I think that is what that statement is alluding to, I am not 100% sure. An Adwords receipt will generally have a vat itemised on it, if it doesn't have it itemised then chances are it was cancelled/deducted/removed [use whichever is technically applicable] at source.

If you have not supplied the VAT code and have subsequently become VAT registered you will been charged 15% VAT in some EU country. You can try claiming that back in the EU VAT refund scheme through HMRC website. The scheme was technically designed for businesses travelling to EU countries and paying for expenses while staying there. Things like hotels, food etc.

But you can always try claiming. I have one that I need to claim.

Note: it's not viable to claim for small amounts as there is a transaction charge I beleive. You also have to wait 3 months before applying for VAT refund. I presume that is due to cash flow for the host nation. VAT returns are done every 3 months so the treasury of that country needs to collect VAT from their business before they can refund you.

 

[graeme1976]

Is using sage there is a tax code T8 that auto does what Scalloway says

 

[Karimbo]

hmm i think i may have completely misunderstood the question here. So apoligies if I have.

I used freeagent which is a complete dummies way to do bookkepping as the interface is designed in plain english. So I'm completely unaware of these paticular filing issues for EC purchases. I just select EC and post the invoice as normal and it does all the VAT postings and whatnot in the background.

 

[HFE Signs]

I thought Google addwords wasn't VATable??

 

[Karimbo]

I thought Google addwords wasn't VATable??

it is, just vatted in some country in Europe. So it's it's handled different for the sake of simplicity. VAT is removed at source.

I'm not sure hows it's treated but I do know on the VAT returns that all the accumulated EU VAT is totalled up in one of the boxes on the VAT return. I suspect if you close the business down you'd own the EU VAT amount to HMRC or the equivalent to other EU country.

 

[Scalloway]

If the bill is zero rated you add the VAT payable to both your input and output VAT. The net result should be zero.

 

[Ali123]

Thanks for the replies.

Just a quick question.

Do i add the amount in box 1 and 4? on the VAT return when submitting it to HMRC?

Can someone kindly confirm this?

Thanks

 

[Ali123]

The reason i ask, is because this message appears when i add the amount in box 1 and 4.

WARNING: Based on the current rate of VAT, the amount you have entered in Box 1 exceeds the amount HM Revenue & Customs would have expected you to declare in comparison to the value you have entered in Box 6. This could be correct if you are making an adjustment to a previous return, or have understated the value in Box 6. If you want to amend your return please click the 'Back' button below and change the amounts you have entered, alternatively please click the 'Submit' button to proceed.

 

[Scalloway]

Should it not be in boxes 2 and 4?

 

[Ali123]

Thanks for the reply. Ill go do that. Thanks

 

[DJR51]

The VAT amount for the Adwords reverse charge invoice should go in boxes 2 and 4 as Scalloway suggests.

But the reason HMRC has flagged up a potential error is probably because you also need to include the net amount of the Adwords purchase in both box 6 and box 7. If you haven't done this, your VAT return could currently be showing an effective VAT rate on sales and/or purchases of more than 20%.

 

[startup-boy]

The VAT amount for the Adwords reverse charge invoice should go in boxes 2 and 4 as Scalloway suggests.

But the reason HMRC has flagged up a potential error is probably because you also need to include the net amount of the Adwords purchase in both box 6 and box 7. If you haven't done this, your VAT return could currently be showing an effective VAT rate on sales and/or purchases of more than 20%.

If you buy services (adwords) worth £25 from Google (Ireland), you'd work out the VAT you would have incurred on it, with the £25 being treated as the VAT-exclusive amount.
So, (£25 x 20% = £5) and add £5 to boxes 1 and 4.
Then add the VAT-exclusive amount - £25 - to box 6 and box 7 (is added automatically for you)
Hence: reverse charge for your google adwords will be:
Box 1= VAT at 20% to box = £5
Box 4= VAT at 20% to box= £5
Box 6= Net purchase amount= £25
Box 7= Net purchase amount= £25

 

[startup-boy]

Should it not be in boxes 2 and 4?

box 2. is for purchases of goods from the EU.