Buy services from EU

You may buy services from a supplier outside the UK but within the EU. For example, Skype are based in Luxembourg. If you choose to enter a bill for those services, here's how to record that bill in FreeAgent.

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.

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.

settings screen - VAT registration section - enable EC VAT reporting box is ticked

Save your changes.

2. Make sure the contact is set for EC VAT

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

select edit details

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.

invoicing address - select a country

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".

ticking EC services box

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 accounts correctly for the reverse charge.

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, or to box 9. These are just for purchases of goods from the EU.

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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