If you buy services from suppliers in the EU, these will not normally have UK VAT on them - but you will still need to track them to be able to work out the reverse charge.
Doesn't FreeAgent do that for me?
Not yet I'm afraid.
1. Make sure EC VAT reporting is enabled
To switch on EC VAT reporting, click Settings at the top right of the screen, then click VAT Registration.
Make sure the "Enable EC VAT Reporting" box is ticked.
Save your changes.
2. Make sure the contact is set for EC VAT
Click the Edit Details button for your contact in the EU.
Make sure the contact's country is in the EU but outside the UK, as you won't be able to tag bills for EC Services if the contact is not set as based in the EU.
Save any changes you have made.
3. Create your bill
You're now ready to create your bill as normal.
As you do that, tick the box saying "EC Services".
When you create the bill, FreeAgent will then pick up that it's for a purchase of services not directly related to goods (such as delivery services), from a supplier in the EU.
If the services are directly related to goods, set the bill as "EC Goods" rather than "EC Services".
Which VAT rate should I choose?
0%. This is important so that FreeAgent doesn't claim any input VAT.
VAT reporting
When you correctly create a bill for the purchase of EC services, whether or not you're on the flat rate scheme, there is no acquisition tax and nothing goes into box 2. That's just for purchases of goods from the EU.
If you aren't on the flat rate scheme
The net amount of the bill will appear in box 7, but not in box 9 which is just for goods.
If you are on the flat rate scheme
The bill won't show up in box 7 or box 9.
I'm buying both goods and services from a supplier in the EU - and the services are not directly related to the goods.
In that case you'll need to create two bills in FreeAgent, one for the goods and the other for the unrelated services.
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