Buy goods from EU

You may buy goods from suppliers based outside the UK but within the EU. If you choose to put bills in for those purchases, here's how to record them in FreeAgent.

If you buy goods from suppliers in the EU, these will not normally have UK VAT on them - but you will still need to report them in box 9 of your VAT return, and account for acquisition tax on the purchase.

What's acquisition tax?

It's what you would have paid in VAT if you'd bought those goods in the UK.

It goes in box 2 of your VAT return, and normally is also added to box 4 so that you don't have extra UK VAT to pay.

1. Make sure EC VAT reporting is enabled

To switch on EC VAT reporting, select Settings at the top right of the screen, then select VAT Registration.

settings screen - vat registration section

Make sure the "Enable EC VAT Reporting" box is ticked.

enable_ec_reporting

Save your changes.

2. Make sure the contact is set for EC VAT

Select the Edit Details button for your contact in the EU.

edit_contact_details

Make sure their country is in the EU but outside the UK, as you won't be able to tag bills for EC VAT if the contact isn't listed as in the EU.

country_only

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 Goods".

bill_status_goods

When you create the bill, FreeAgent will then pick up that it's for a purchase of goods, and services directly related to those goods (such as delivery services), from a supplier in the EU.

Which VAT rate should I choose?

Use 0% or Auto VAT.

VAT reporting - if you're not on the flat rate scheme

When you correctly create a bill for the purchase of EC goods, FreeAgent will work out the VAT you would have paid on this bill if it had come from a UK supplier.

It does that by looking at the automatic VAT setting for the category you've put the bill into.

It'll then add that to boxes 2 and 4 of your VAT return, so that you don't pay any additional VAT.

The net amount of the bill also goes into boxes 7 and 9.

VAT reporting - if you're on the flat rate scheme

When you correctly create a bill for the purchase of EC goods, FreeAgent will work out the VAT you would have paid on this bill if it had come from a UK supplier.

It does that by looking at the automatic VAT setting for the category you've put the bill into.

It'll then add that to box 2 only of your VAT return, because you still have to pay acquisition tax even when you're on the flat rate scheme - but you can't reclaim it when you're on the flat rate scheme.

The net amount of the bill also goes into boxes 7 and 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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