There was a really good question on the forum this week about the Place of Supply of Services (“POSS”) rules and reverse charge services. The question was how you account for reverse charge VAT if you aren’t registered for VAT.
The answer is that there is no mechanism to account for VAT if you aren’t registered so in effect you get the services “VAT free”. However businesses who import reverse charge services are required to count the value of such services towards their VAT registration limit. So if the value of the “normal” supplies that you make is say £55k per annum and you pay Google £15k for advertising each year, then your total turnover for VAT registration purposes is actually £70k and this would put you over the VAT registration limit.
Since when do purchases count towards sales???????
Now who the heck would know that? It is explained very well in HMRC’s VAT Notice 741 on the subject and it is in the main body of the 1994 VAT Act. But even with the expansion of internet business over recent years, most people wouldn’t be aware that the value of these reverse charge purchases have to be included in turnover for VAT registration purposes. It goes against the grain to think that you have to include the value of certain purchases towards your income for VAT registration purposes.
And this concerns me, because you can be penalised for failing to register for VAT at the correct time and lack of knowledge about the subject is not regarded as a good enough excuse for getting it wrong. But it is a pretty fundamental point, isn’t it? And you could forgive any accountant for not being aware of this rule, never mind anyone with limited VAT knowledge who is running their own business. You would assume that by keeping an eye on the turnover, you are doing enough to ensure that you register for VAT at the right time, but who would ever think that you have to remember to treat certain purchases as sales?
Back to normal
Anyway, the most important thing that has happened to me this week is that I’ve got my car back. I sort of feel as though I’ve rejoined the human race, as for the past 3 weeks I’ve had to use public transport or do a lot of walking. Not that either of those things are bad, but life is just so much easier when you’ve got your own car. And I have to admit, I’ve missed a couple of networking events this past couple of weeks because it would have taken me longer to get there on public transport than the events would have lasted.
There’s a definite feel of autumn in the air nowadays, more grey days and of course the nights are now longer than the days. But I still love the fact that the weather is cooler, it just makes me feel so much better.
As I write this, I’m watching the NASA rocket crashing into the surface of the moon. Most of you will know that I’m a self-confessed geek at heart and am fascinated with anything to do with space and the universe. I’m still impressed by the fact that we can send rockets to other planets and moons in our solar system, so far away. Of course nowadays going to the moon is really like travelling to the next street in space terms, but if crashing this rocket helps the scientists establish that there is more water on the moon, that would be impressive as it would mean that having a permanent base on the moon would be much easier and much more likely. Interesting stuff.
I hope you all have a great weekend and get the chance to enjoy some of the lovely crisp autumn weather.
Marie