How the SPLedger VAT and Tax Options Work
Table Of Contents
Overview
Khaos Control includes several options within the Supplier Purchase Ledger (SP Ledger) to help businesses process purchase invoices correctly following Brexit.These options support:- Postponed VAT Accounting (PVA)
- Reverse Charge VAT
- Service Reverse Charges
- Northern Ireland import processing
- Consignments above and below the £135 threshold
Important: While Khaos Control provides the tools required to process these transactions, it cannot determine the correct VAT treatment for your business. You should always ensure the appropriate option is selected and seek guidance from HMRC or your accountant where necessary.
Khaos Control includes several options within the Supplier Purchase Ledger (SP Ledger) to help businesses process purchase invoices correctly following Brexit.
These options support:
- Postponed VAT Accounting (PVA)
- Reverse Charge VAT
- Service Reverse Charges
- Northern Ireland import processing
- Consignments above and below the £135 threshold
Important: While Khaos Control provides the tools required to process these transactions, it cannot determine the correct VAT treatment for your business. You should always ensure the appropriate option is selected and seek guidance from HMRC or your accountant where necessary.
Available Purchase Ledger Options
The following options are available within the SP Ledger.
The following options are available within the SP Ledger.
Less Than £135
Tick this option when the total net value of the entire consignment is less than £135.The £135 limit applies to the whole consignment, not the individual invoice being posted.Important: Khaos Control cannot determine the value of the entire shipment automatically. You are responsible for ensuring this option is selected only when applicable.
Tick this option when the total net value of the entire consignment is less than £135.
The £135 limit applies to the whole consignment, not the individual invoice being posted.
Important: Khaos Control cannot determine the value of the entire shipment automatically. You are responsible for ensuring this option is selected only when applicable.
EU Import into NI
This option is intended for businesses based in Northern Ireland importing goods from the European Union.When selected, VAT is processed in the same way as it was before Brexit.
This option is intended for businesses based in Northern Ireland importing goods from the European Union.
When selected, VAT is processed in the same way as it was before Brexit.
Existing Reverse Charge Options
The following options continue to be available where appropriate.
The following options continue to be available where appropriate.
EC/RC Tax
This option should only be used when processing purchase ledger transactions.It creates equal VAT debit and credit postings within the VAT Return, resulting in a net VAT effect of zero.Common examples include:- EC supplier credit notes
- Reverse charge VAT purchases
Note: This option is intended for purchase ledger processing only.
This option should only be used when processing purchase ledger transactions.
It creates equal VAT debit and credit postings within the VAT Return, resulting in a net VAT effect of zero.
Common examples include:
- EC supplier credit notes
- Reverse charge VAT purchases
Note: This option is intended for purchase ledger processing only.
Service RC
Used when receiving services from overseas suppliers where reverse charge VAT rules apply.Common examples include:- Overseas freight providers
- Translation services
- Legal services
- Consultancy services
When used:- One VAT posting is created on the purchase side.
- One VAT posting is created on the sales side.
- The two values offset each other on the VAT Return.
Important: Before using either EC/RC Tax or Service RC, obtain confirmation that the VAT treatment is appropriate for your circumstances.
Used when receiving services from overseas suppliers where reverse charge VAT rules apply.
Common examples include:
- Overseas freight providers
- Translation services
- Legal services
- Consultancy services
When used:
- One VAT posting is created on the purchase side.
- One VAT posting is created on the sales side.
- The two values offset each other on the VAT Return.
Important: Before using either EC/RC Tax or Service RC, obtain confirmation that the VAT treatment is appropriate for your circumstances.
Postponed VAT Accounting (PVA)
Postponed VAT Accounting allows import VAT to be accounted for directly on the VAT Return rather than being paid upfront at the point of import.For more information, see:
Postponed VAT Accounting allows import VAT to be accounted for directly on the VAT Return rather than being paid upfront at the point of import.
For more information, see:
Additional Notes
- PVA can apply to purchases from UK suppliers.
- The PVA information message may not always be displayed for UK supplier transactions.
- Khaos Control does not determine whether PVA applies to a transaction.
- PVA can apply to purchases from UK suppliers.
- The PVA information message may not always be displayed for UK supplier transactions.
- Khaos Control does not determine whether PVA applies to a transaction.
Processing Scenarios
The following examples explain how different supplier and consignment types should be processed within the SP Ledger.
The following examples explain how different supplier and consignment types should be processed within the SP Ledger.
Service Reverse Charges
These transactions continue to work in the same way as before Brexit.
These transactions continue to work in the same way as before Brexit.
UK Supplier with VAT
Process as a normal purchase invoice.
Process as a normal purchase invoice.
UK Supplier without VAT
Process as a normal purchase invoice.No Brexit-specific settings are required.
Process as a normal purchase invoice.
No Brexit-specific settings are required.
Consignments Over £135 Net
Use this method when the total net value of the consignment exceeds £135 and Import VAT is being accounted for through Postponed VAT Accounting.
Use this method when the total net value of the consignment exceeds £135 and Import VAT is being accounted for through Postponed VAT Accounting.
UK Supplier
- Set Tax Rate to Exempt.
- Enter the Net Amount.
- Enter the Import VAT amount in EC/RC VAT.
Note: The PVA warning message is not displayed for this scenario.
- Set Tax Rate to Exempt.
- Enter the Net Amount.
- Enter the Import VAT amount in EC/RC VAT.
Note: The PVA warning message is not displayed for this scenario.
EC Supplier
- Set Tax Rate to Exempt.
- Enter the Net Amount.
- Enter the Import VAT amount in EC/RC VAT if applicable.
- Review the PVA confirmation message.
- Set Tax Rate to Exempt.
- Enter the Net Amount.
- Enter the Import VAT amount in EC/RC VAT if applicable.
- Review the PVA confirmation message.
Rest of World (ROW) Supplier
- Set Tax Rate to Exempt.
- Enter the Net Amount.
- Enter the Import VAT amount in EC/RC VAT.
- Review the PVA confirmation message.
- Set Tax Rate to Exempt.
- Enter the Net Amount.
- Enter the Import VAT amount in EC/RC VAT.
- Review the PVA confirmation message.
Consignments Under £135 Net
Use this method when the total net value of the entire consignment is less than £135 and reverse charge VAT rules apply.
Use this method when the total net value of the entire consignment is less than £135 and reverse charge VAT rules apply.
UK Supplier
- Set Tax Rate to Exempt.
- Tick Less than £135.
- Enter the Net Amount.
- Enter the reverse charge VAT amount into EC/RC VAT if required.
No warning message is displayed.
- Set Tax Rate to Exempt.
- Tick Less than £135.
- Enter the Net Amount.
- Enter the reverse charge VAT amount into EC/RC VAT if required.
No warning message is displayed.
EC Supplier
- Set Tax Rate to Exempt.
- Tick Less than £135.
- Enter the Net Amount.
- Enter the reverse charge VAT amount into EC/RC VAT if required.
- Review the confirmation message displayed.
- Set Tax Rate to Exempt.
- Tick Less than £135.
- Enter the Net Amount.
- Enter the reverse charge VAT amount into EC/RC VAT if required.
- Review the confirmation message displayed.
Rest of World (ROW) Supplier
- Set Tax Rate to Exempt.
- Tick Less than £135.
- Enter the Net Amount.
- Enter the reverse charge VAT amount into EC/RC VAT if required.
- Review the confirmation message displayed.
- Set Tax Rate to Exempt.
- Tick Less than £135.
- Enter the Net Amount.
- Enter the reverse charge VAT amount into EC/RC VAT if required.
- Review the confirmation message displayed.
Recording an Invoice for Services
Use this process when recording services supplied by an EC or Rest of World supplier.
Use this process when recording services supplied by an EC or Rest of World supplier.
EC or ROW Supplier
- Set Tax Rate to Exempt.
- Enter the Net Amount.
- Enter the appropriate VAT amount into EC/RC VAT.
- Tick Service RC.
- Complete the posting.
- Set Tax Rate to Exempt.
- Enter the Net Amount.
- Enter the appropriate VAT amount into EC/RC VAT.
- Tick Service RC.
- Complete the posting.
Result
Khaos Control creates:- One purchase-side VAT entry.
- One sales-side VAT entry.
These transactions offset each other on the VAT Return.A confirmation message will be displayed before posting.
Khaos Control creates:
- One purchase-side VAT entry.
- One sales-side VAT entry.
These transactions offset each other on the VAT Return.
A confirmation message will be displayed before posting.
Processing Imports into Northern Ireland
Businesses based in Northern Ireland importing goods from the EU should use the EU Import into NI option where applicable.
Businesses based in Northern Ireland importing goods from the EU should use the EU Import into NI option where applicable.
Northern Ireland Business Purchasing from an EU Supplier
- Tick EU Import into NI.
Depending on your System Values configuration, this option may be selected automatically when an EU supplier is used.
- Continue processing the purchase invoice as normal.
- Tick EU Import into NI.Depending on your System Values configuration, this option may be selected automatically when an EU supplier is used.
- Continue processing the purchase invoice as normal.
Result
The VAT treatment follows the same approach previously used for EC supplier transactions before Brexit.
The VAT treatment follows the same approach previously used for EC supplier transactions before Brexit.
Important Notes
- Khaos Control cannot determine whether a shipment is above or below the £135 threshold.
- Always verify the value of the complete consignment before posting.
- Reverse charge processing should only be used when appropriate for your VAT treatment.
- PVA, EC/RC Tax and Service RC should be used according to current HMRC guidance.
- Northern Ireland businesses may have different VAT treatment requirements to businesses located in Great Britain.
- Khaos Control cannot determine whether a shipment is above or below the £135 threshold.
- Always verify the value of the complete consignment before posting.
- Reverse charge processing should only be used when appropriate for your VAT treatment.
- PVA, EC/RC Tax and Service RC should be used according to current HMRC guidance.
- Northern Ireland businesses may have different VAT treatment requirements to businesses located in Great Britain.
Related Articles
- Supplier Purchase Ledger
- EC_Sales_List_Tab" target="_blank" rel="noopener noreferrer">EC Sales List
- Intrastat Report
- HMRC: Postponed VAT Accounting
- HMRC: VAT and Overseas Goods Sold Directly to Customers
- Supplier Purchase Ledger
- EC_Sales_List_Tab" target="_blank" rel="noopener noreferrer">EC Sales List
- Intrastat Report
- HMRC: Postponed VAT Accounting
- HMRC: VAT and Overseas Goods Sold Directly to Customers