Invoice received in Euros(€) with VAT: should this VAT be recorded for our return?

We have received an invoice in € for bus travel and airport transfers for a rugby tour whilst in Italy. The invoice include IVA (VAT) of 10%. When recording this transaction, should we show the 10% VAT in order for it to be included in our quarterley VAT return?

You cannot reclaim foreign VAT that has been charged on an invoice from an overseas supplier. You can only ever reclaim UK VAT that has been charged by a supplier who has a UK VAT number, on your UK VAT return. You should therefore record the invoice as a gross amount, no VAT, seeing as the VAT can't be reclaimed on the UK VAT return. The 10% IVA could be reclaimed by making a VAT refund claim directly to the Italian tax office.https://www.gov.uk/government/publications/accounting-for-vat-on-goods-moving-between-great-britain-and-northern-ireland-from-1-january-2021/check-how-to-claim-a-refund-of-vat-paid-in-an-eu-member-state If you think how VAT works, UK supplier raises invoice to UK customer, say £100 + £20 VAT. The customer pays £120 to supplier and supplier pays £20 VAT to HMRC and keeps £100...customer is out of pocket by £20 and HMRC are up by £20, the supplier is neutral as they just charged it and collected it. If the customer can reclaim the VAT back from HMRC, then the supplier, HMRC and customer are all neutral, there is no VAT loss anywhere and this is how VAT generally works. If the supplier is in Italy and charges Italian VAT to the UK customer, the Italian supplier doesn't pay this VAT over to HMRC, the supplier pays it over to the Italian taxman. If then a UK customer reclaims this Italian VAT from HMRC, HMRC are now out of pocket by £10, the Italian government are up £10 and there is no mechanism for the Italians to pass that £10 over to HMRC, this then creates a VAT loss for HMRC and if HMRC were to discover this during a VAT inspection, HMRC would assess the UK business for reclaiming VAT they are not entitled to reclaim (foreign VAT).

Ok, I thought as much but wanted to check. Thanks

Hi,

The VAT has been incurred outside of the UK and therefore would not need to be reflected on the UK VAT return.

Thank you.