Reverse Charge VAT

The reverse charge procedure has been designed by the HMRC to try to counter some forms of criminal attack on the UK VAT system by means of fraud, such as Missing Trader Intra-Community (MTIC) fraud.

The reverse charge procedure results in, essentially, a business-to-business (b2b) tax-neutral chain of transactions, with the seller no longer having to account for VAT, so it removes the opportunity to steal the VAT in b2b transactions within the UK.  Supplies of relevant goods and services remain subject to the reverse charge until they are excepted from the procedure or are exported or dispatched to another Member State.

Whilst the reverse charge effectively removes VAT in a series of b2b transactions, it still has its own revenue risks.  For example, a buyer disappearing without accounting for the reverse charge output tax.

The reverse charge for specified goods does not apply universally throughout the EU.  Therefore, some taxable persons who use the reverse charge might be acting as conduits (taxable persons who facilitate MTIC fraud in the EU, where the tax loss is in another Member State).

The reverse charge: How the reverse charge works – an example

Example 1: From a VAT registered distributor to a retailer to an end consumer

A VAT registered UK distributor of mobile phones sells a number of mobile phones to a VAT registered UK retailer for a VAT-exclusive value of £6,000, an amount that is above the de minimis limit. The distributor does not charge VAT on the supply (£1,200), specifying on its invoice that the reverse charge applies.

The retailer will account for the distributor’s output tax (£1,200) but will also reclaim the amount as input tax, thus producing a nil net effect. The retailer now sells the mobile phones to members of the general public, charging VAT on the supply as normal.

Example 2: From a VAT registered distributor through a series of wholesalers to final dispatch

A distributor sells a number of mobile phones to a wholesaler (WS1) for a VAT-exclusive value of £6,000, an amount that is above the de minimis limit. The distributor does not charge VAT on the supply (£1,200), specifying on its invoice that the reverse charge applies.

WS1 will account for the distributor’s output tax (£1,200) but will reclaim the tax as input tax, thus producing a nil net effect. WS1 now sells the mobile phones to another wholesaler (WS2) for a VAT-exclusive value of £7,000. WS1 does not charge VAT on the supply (£1,400), specifying on its invoice that the reverse charge applies.

WS2 will account for WS1’s output tax (£1,400) but will reclaim the tax as input tax, thus producing a nil net effect. WS2 now sells the mobile phones to a third wholesaler (WS3) for a VAT-exclusive value of £8,000. WS2 does not charge VAT on the supply (£1,600), specifying on its invoice that the reverse charge applies.

WS3 will account for WS2’s output tax (£1,600) but will reclaim the tax as input tax, thus producing a nil net effect. WS3 now sells the mobile phones to a taxable person registered for VAT in another Member State for a VAT-exclusive value of £9,000. WS3 does not charge VAT on the supply as this becomes zero-rated.

If we look at how this would translate onto the VAT returns, we have:

                                                Distributor        WS1                 WS2                 WS3

Reverse charge output tax*       £0                    £1,200              £1,400              £1,600

Input Tax*                                £0                    £1,200              £1,400              £1,600

Net Tax                                    £0                    £0                    £0                    £0

Outputs                                    £6,000              £7,000              £8,000              £9,000

Inputs                                       £0                    £6,000              £7,000              £8,000

The above assumes that the distributor made no purchases and WS 1-3 made no other purchases or supplies.

Useful Excel shortcuts you need in your life!

Nowadays life is so fast paced that we could all do with more time to get things done, so anything that can be streamlined should be! These really handy Excel shortcuts will save you some precious minutes (or hours!) so you can fit in the more important things.

There are tons of shortcuts in Excel, but here are the most frequently used ones:

Navigation Shortcuts

These simple shortcuts can help you navigate between workbooks, sheets, rows and columns:

Move up through a selectionShift + Enter (PC and Mac)
Jump to the top of a columnCTRL + ↑ (PC); Command + ↑ (Mac)
Jump to the bottom of a columnCTRL + ↓ (PC); Command + ↓ (Mac)
Jump to the corner of a selection (Note: Rotate to each corner by repeating this keystroke)CTRL + . (PC and Mac)
Close the active workbook windowCTRL + w (PC); Command + W (Mac)
Switch to previous workbook windowCTRL + Shift + F6 (PC); Command + Shift + F6 (Mac)
Switch to the next open worksheetCTRL + Tab (Mac only)
Switch to the previous open worksheet (Mac)CTRL + Shift + Tab (Mac only)
Start a new chart sheetF11 (PC and Mac)
Insert a new sheetShift + F11 (PC and Mac)
Repeat the last actionCTRL + y (PC); Command + Y (Mac)
Fill selected cell with the content in the cell above selected cellCTRL + d (PC and Mac)
Fill selected cell with the content in the cell to the left of selected cellCTRL + r (PC and Mac)

Format Shortcuts

Formatting in Excel can be difficult if you don’t know of what you’re doing. Here are a few shortcuts that will help you easily format your cells. To start, here’s a featured formatting shortcut you might not have known about:

Excel Strikethrough Shortcut

The Excel strikethrough shortcut will strike a line through the middle of the value or text in a highlighted cell. To strike a line through a cell, highlight the cell and press CTRL + 5 on your keyboard.


Find and replace values
CTRL + F (PC); Command + F (Mac)
Show all values as percentagesCTRL + Shift + % (PC and Mac)
Show all values as currency (Note: Replace $ with your own country’s currency key)CTRL + Shift + $ (PC and Mac)
Show all values in general number formatCTRL + Shift + ~ (PC and Mac)
Apply or remove bold formatting to selected cellsCTRL + 2 (PC); Command + b (Mac)
Apply or remove italic formatting to selected cellsCTRL + 3 (PC); Command + i (Mac)
Hide selected rowsCTRL + 9 (PC and Mac)
Unhide selected rowsCTRL + Shift + ( (PC and Mac)
Hide selected columnsCTRL + 0 (PC and Mac)
Unhide selected columnsCTRL + Shift + ) (PC and Mac)
Insert current dateCTRL + ; (PC and Mac)
Insert current timeCTRL + Shift + : (PC); Command + ; (Mac)
Insert a hyperlinkCTRL + k (PC); Command + k (Mac)
Apply an outline border to selected cells (see screenshot below)CTRL + Shift + & (PC); Command + Option + 0 (Mac)

Shortcuts for Selecting Rows & Columns

Save yourself the manual dragging and selecting rows and columns with these handy keyboard tricks. To start, here are two featured rows-related shortcuts you might not have known about:

Excel Insert Row Shortcut

The insert row shortcut in Excel will create a new row below a highlighted cell. To insert a new row, highlight a cell or entire row and press CTRL + Shift + + on your keyword, literally pressing the plus sign after Shift. This will open a small window of options where you can insert a new row or column.

 Expand the selection by one cell either upward (↑) or downward (↓)Shift + ↑ [or] Shift + ↓ (PC and Mac)
Expand the selection to the last non-empty cellCTRL + Shift + Arrow Key (PC); Command + Shift + Arrow Key (Mac)
Select entire columnCTRL + [spacebar] (PC and Mac)
Select entire rowShift + [spacebar] (PC and Mac)
Select entire sheetCTRL + a (PC); Command + a (Mac)
Select only the visible cells in the current selectionAlt + ; (PC); Command + Shift + z (Mac)

Formula Shortcuts

Start a formula (e.g. “=A4+A5”)= (i.e. press the “equals” sign; PC and Mac)
Insert AutoSum formulaAlt + (PC); Command + Shift + t (Mac)
Edit active cellF2 (PC); CTRL + u (Mac)
Display the Formula Builder after you type a valid function name in a formulaCTRL + a (PC and Mac)

Miscellaneous Shortcuts

Here are a few more time-saving shortcuts. To start, here’s a final featured shortcut for managing the size of your Excel worksheet:

Excel Delete Row Shortcut

The Excel delete row shortcut will delete the row below a highlighted cell. To delete this row, highlight a cell or entire row and press CTRL + – on your keyboard, literally pressing the minus sign after CTRL. This will open a small window of options where you can “shift cells up.”

Save your work as…Control + Shift + s (PC); Command + Shift + s (Mac)
Open spelling & grammar checkF7 (PC and Mac)
Insert a comment (see screenshot below)Shift + F2 (PC and Mac)

If you would like more time to concentrate onyour business and less on paperwork then let us look after your bookkeeping and keep your finances on track by calling Smarties Bookkeeping on 0117 9000 895or emailing info@smartiesbookkeeping.co.ukor alternatively, by using our contact page on our website: http://smartiesbookkeeping.co.uk/contact/

How to (legally) take money out of a limited company!

You’ve just become the director of a new limited company but now that your company is a separate legal entity how do you go about taking money out of the company it belongs to?
How you take money out of a limited company depends on a couple of things: what it is for and how much you are taking out.

You can take the money out as salary, expenses and benefits payments but you need to make sure the company is registered with HMRC as an employer first.
The company must take Income Tax and National Insurance contributions from your salary payments and pay these to HM Revenue and Customs (HMRC), along with employers’ National Insurance contributions.

If you or one of your employees make personal use of something that belongs to the business, you must also report it as a benefit and pay any tax due.

You can also take money out of the company in the form of Dividendswhich is a payment a company can make to shareholders if it has made a profit.

However, you cannot count dividends as business costs when you work out your Corporation Tax and your company does not need to pay tax on dividend payments, but shareholders may have to pay Income Tax if they’re over £2,000.

It is also very important that your company does not pay out more in dividends than its available profits from current and previous financial years.

To pay a dividend, you must hold a directors’ meeting to ‘declare’ the dividend and keep minutes of the meeting, even if you’re the only director, and write up a dividend voucher which shows the date, company name, names of shareholders being paid a dividend and the amount of the dividend. 
You must give a copy of the voucher to recipients of the dividend and keep a copy for your company’s records.

If you are taking money out of the company (or paying in) and it is not a salary or dividend then it can be treated as a Directors Loan.
If your company makes directors’ loans then you must keep records of them (or ask your bookkeeper to) as at the end of your company’s financial year any money you owe or is owed to you by the business is included on the balance sheet. There are also some detailed tax rules about how directors’ loans are handled so you may have to pay tax on any money you owe the company.

For the most tax efficient and compliant ways to take money out of your limited company it is highly advisable to seek advice and guidance from your bookkeeper and accountant who can help you keep on track. Contact Smarties Bookkeeping and we can assist you on your financial journey by calling us on 0117 9000 895 or send an email to Info@smartiesbookkeeping.co.uk.