Sales tax rate for reverse charge payments?

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1

I have been getting conflicting validation errors when I try to post reverse charge bank transaction explanations to FreeAgent.

Usually I have sales_tax_rate set to -5 (out of scope) when ec_status is "Reverse Charge". But yesterday I ran into an error saying reverse charge payments must have their VAT rate set to 0% or Auto. So I changed the code to set 0 instead of -5.

Today I got an error saying that reverse charge payments must have their VAT rate set to Out of Scope if tagging as EC Services or Reverse Charge.

Clearly there’s some nuance I’m not aware of about when to use Out of Scope and when to use 0%/Auto. Please could you clarify?

Many thanks,
Andrew Stewart

2

Hi Andrew,

Apologies for the delay in replying.

Clearly there’s some nuance I’m not aware of about when to use Out of Scope and when to use 0%/Auto. Please could you clarify?

When a bank transaction is explained to Sales or another custom Income category, and is marked as Reverse Charge, we require it to be set to Out Of Scope of VAT.

For transactions marked as Reverse Charge that are explained as Payments, these are the ones where VAT must be set to 0% or Auto, which will set it to 0%.

Sorry that the error message in these cases aren’t specific about the type of the transaction.

Many thanks,
Gerard
FreeAgent

3

Hi Gerard,

Aha! That makes sense. Thank you :grinning_face:

Yours,
Andrew