Boxes 6 and 7 - include amounts or leave them out?

Hi, I'm unclear whether a few items should be included within Boxes 6 and 7, Sales and Purchases, or be excluded. We are a UK based manufacturing company. We will purchase goods in Germany that will be transported directly to the customer in North America. Those goods will never enter the UK. Should the purchase of the goods be included in box 7 (noting that the goods never enter the UK) or excluded? There will be no UK VAT on the sale as the goods are never in the UK. Should we exclude those sales from box 6 of our VAT return, or include them? Our UK team members have overseas work trips and we incur costs in relation to overseas hotels etc. Should the hotel cost be reported in Box 7 where (a) the overseas hotel charge is paid directly by the company; and (b) where the cost is settled by the employee and then reimbursed by the company. Thank you

James. Has your German supplier confirmed to you whether they will be charging you German VAT or not? Suggest you get confirmation from them first as you may have a bigger issue to contend with. You have to look at this transaction in slow motion....i) USA places order with you in UK, ii) you place order with supplier in Germany, iii) Germany ships those goods to USA. Technically, you (UK) take possession of the goods in Germany. At the time the goods are shipped to USA, the German supplier no longer owns the goods, they've sold them to you (UK) and then shipped your goods to the USA. Because you take possession of those goods in Germany, i) the Germans should charge you German VAT as they are not exporting anything, they are making a domestic German sale from their warehouse in Germany to you in Germany. Then when the goods ship from Germany, as you own those goods in Germany, this triggers a German VAT registration for the UK company. As the UK entity now has a German VAT registration, the purchase does not hit your UK VAT return, not does the sale, however, both the purchase and sale would need to be declared on your German VAT return. Overseas costs such as hotels do go into Box 7, see here for HMRC's detailed guidance (section 4) link below. You cannot reclaim foreign VAT on your UK VAT return, so record the gross value in Box 7, that way come year end and working out profits to declare under corporation tax, you will have included the irrecoverable VAT elements as part of your cost of sale/expenditure. https://www.gov.uk/guidance/how-to-fill-in-and-submit-your-vat-return-vat-notice-70012#para-4

Hi Jason, Thank you for your reply. Your response makes it clear how important precise language is in the world of tax, and VAT specifically. My question should have noted that we will purchase goods from a German company, rather than purchasing goods in Germany. The German supplier will be exporting the goods from Germany, and we will take ownership on the high seas. The sale will be reported by the German company as a zero-rated export. We will not be registering for German VAT. Is your point that you would expect the purchase and the sale to be recorded in "a" VAT return of my UK company? Therefore, if we do not record the purchase in a German VAT return (because we have no German VAT obligations / filings) then we must include it in our UK VAT return (being our only VAT return)? Is that the same with sales? Is your point that we should record these purchases and sales transactions in "a" VAT return of the company? I'm guessing you're making the same point re hotel costs, that we need to include these somewhere; if we have no other appropriate VAT return to include the purchase in, then it should go into the UK VAT return? I note your point regarding VAT recovery. Apologies if I'm missing something obvious, but I couldn't find any wording in section 4 that would make the position clear to me... Thank you for your response, and for reminding me the choose my words more carefully when discussing VAT. Regards, James

Hi, Would it be possible for an HMRC Admin to provide guidance here? If any further information / clarification is required, please would you let me know. Thanks, James

Hi
I would advise contacting the Customs and International trade helpline on 0300 322 9434 if you have any other issues with your query.