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A VAT-registered UK business purchased software which it downloaded from the internet. The vendor located elsewhere in the EU has charged VAT
A client has recently encountered a niggling VAT problem. It recently bought some software which it downloaded from the internet. The software company has charged VAT presumably from some subsidiary elsewhere in the EU.
However my client is VAT-registered in the UK and considers that the overseas VAT should not have been charged in the first place.
The client recognises that it should account for UK VAT at 20% on the reverse-charge basis and then recover the same amount (its supplies are fully taxable) as input tax. However on what amount should this reverse charge be made?
Should it be on that charged to the company’s credit card account (ie sale price plus 15% VAT) or just on the sale price? I do recognise that because all the input tax is fully recoverable it makes little difference to the final tax bill but my...
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