If you have a business that offers goods/services outside the UK to Europe then this article will explain how the VAT is treated in Farmplan Business Cloud.
NB – this will change from 31 December 2020 so please check the current legislation.
VAT on goods and services sold to Europe
When selling goods or services from the UK to other EU countries, the VAT treatment can differ depending on your customer.
As a general rule, when selling to non-VAT registered businesses and consumers in other EU countries you should charge them full UK VAT on your sales ('ST' VAT code in Farmplan Business Cloud). However, you do need to check each countries' 'distance selling threshold' to see whether you need to register there as well - see below.
If you are selling to another EU business that is VAT registered in their country, then you do not charge VAT i.e. it is treated as 0%. To do this you should ask your customer for their VAT registration number and show it on your invoice with a note to say that you are zero-rating the sale.
On your invoices to these customers you should use either of the following VAT codes in Farmplan Business Cloud:
ES: Europe Services, if you are selling a service to your European customers.
EG: Europe Goods, if you are selling goods to your European customers.
You must also complete an EC Sales list which is a quarterly report to HMRC listing the sales to your VAT registered European business customers. If you use the correct VAT codes in Farmplan Business Cloud then the software will populate your EC Sales list automatically each quarter (always the calendar quarters).
To produce your EC Sales list please go to Reports > EC Sales List
As you can see, the EC sales list in Farmplan Business Cloud has picked up the invoice just raised to your German customer. There is a button here to 'Check VAT Numbers' which will ensure your customer's VAT numbers are legitimate, and therefore whether or not you can zero rate the VAT. Once this is checked you can lock the return and submit it to HMRC.
Purchase from EU Countries
If you purchase an item from a EU country then both input and output is declared at the UK rate on the VAT return. However Farmplan Business Cloud will handle this for you so just enter the net amount on each item but ensure that you use the VAT status of:
ES: Europe Services, if you are purchasing a service from European customers.
EG: Europe Goods, if you are purchasing goods from European customers.
The VAT return will show VAT on acquisitions from other EC member states (box 2) and VAT reclaimed on purchases (box 4). The net value will be shown as a purchase (box 7) and value of goods supplied from other EC member states (box 9).
Should you register for VAT in other EU countries?
Distance selling is when a VAT-registered business in one EU country sells goods or services to a non-VAT registered customer in another EU country.
Each country in Europe has a distance selling VAT threshold, which if breached means that you must register for VAT in that country. However, this only applies to the sales you make to customers that are not VAT registered in their own country. So for example, the distance selling VAT threshold for Germany is 100,000 euros and Ireland is 35,000 euros. So if you sell goods of 50,000 euros to non-VAT registered consumers in each country you would need to register for VAT in Ireland but not Germany.
This means you should keep an eye on the level of sales you’re making to consumers in each European country so that you know when you breach these registration thresholds.
VAT on sales outside the EU
You do not need to charge VAT on goods or services you sell to customers outside of the EU. However, goods are treated slightly differently from services.
Goods are zero rated, which means the value of the goods will show on your VAT return (use VAT code 'EX' in Farmplan Business Cloud), albeit with no VAT reported. But services sold outside the EU are what’s called ‘outside the scope’ of VAT (use VAT code 'NV' in Farmplan Business Cloud). This means that they are not reported on the VAT return and VAT is not a consideration.
Different types of businesses can have different rules and this area can get a lot more complex, so it’s always worth discussing VAT with a professional if you are not sure.
Purchases outside the EU
Again the rules will depend on the invoice wording and the country of origin. Please check with a professional if you are not sure how to treat it.