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I don’t understand the concept of “reverse charge system” when good are received in UK from a EU member country.
If goods are worth 100000, then output VAT accounted for by the Uk business will be 20000 payable to HMRC. And at the same time business will also account for input VAT of 20000. So input and output VAT will cancel out each other on next VAT return filed.
But what is the use of charging output VAT if it is equally recoverable as input VAT .what is the sense here ?Because not all businesses make taxable supplies – therefore if a UK business makes exempt supplies it will have to account for the output VAT on the purchase from the EU business but will not then be able to recover the input VAT on its VAT return hence it will have to pay over 20,000 to HMRC
ok thanks. and also..
In case of imports from countries outside EU, importer has to pay VAT as import duty which is later recoverable as input VAT by the trader. Does this concept that “importer will unable to claim input VAT if he is supplying exempt suplies in UK” also applies to imports from countries outside EU ?
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