VAT 0% even I pass value 5%

1

Hi,

I have passed VAT percentage 5% but it shows 0% when I post a bill. My bill object is as below. Please update me as soon as possible.

“{“bill”:
{
“url”:null,
“contact”:“https://https://api.sandbox.freeagent.com/v2/contacts/85617”,
“category”:“https://https://api.sandbox.freeagent.com/v2/categories/250”,
“reference”:“B323579”,
“dated_on”:“01-09-2020 00:00:00”,
“due_on”:“30-09-2020 00:00:00”,
“comments”:“0001 Pencil Quantity - 20.0000”,
“total_value”:“400.00”,
“paid_value”:null,
“due_value”:“400.00”,
“sales_tax_status”:“TAXABLE”,
“currency”:“GBP”,
“sales_tax_rate”:“5.00”,
“manual_sales_tax_amount”:0.0,
“status”:null,
“long_status”:null,
“contact_name”:null,
“attachment”:null
}
}”

2

Hi Nishit,

The first thing I’d check is whether the company in question is VAT-registered. What’s the value of the sales_tax_registration_status field when you query /v2/company?

Best wishes,

Ewa

3

Hi Ewa

VAT-registered status is as below.

“sales_tax_registration_status”:“Registered”,

Please help me for the same.

4

Hi again Nishit,

Thanks a lot for checking the company’s VAT registration status. I’ve just taken a closer look at your request body and I think I spotted the problem – I see that you’re passing both the sales_tax_rate (set to 5%) and manual_sales_tax_amount (set to 0.0). If both of these attributes are specified, manual_sales_tax_amount takes precedence, which is why your bill was created with no sales tax. This is explained in our Sales Tax documentation here:

If you specify both a manual_sales_tax_amount and a sales_tax_rate, the sales_tax_rate will be ignored and the sales_tax_value will be calculated based only on the manual_sales_tax_amount (both value and amount will be returned in the response).

I hope this helps!

Best wishes,

Ewa

5

Hi Ewa,

I got your point but when I pass bill with foreign currency then manual_sales_tax_amount is required. and in default currency sales_tax_rate is required. but the common thing is bill so What should I do to handle these both scenarios.

Please update me regarding the same as soon as possible.

Thanks

6

Hi Nishit,

I think you’ve got a couple of options:
a) adjust the logic of your application to send only manual_sales_tax_amount for foreign currency bills and sales_tax_rate or manual_sales_tax_amount for native currency bills
b) always pass in manual_sales_tax_amount for both foreign and native currency bills and not use sales_tax_rate at all

Best wishes,

Ewa

7

Hi Ewa,

Thanks for your reply.

The issue we can see from accounting point of view is when we prepare the VAT return.
Since in a VAT return we need to be able to show the analysis between the different types of tax rates. so the accountant can check all transactions have been analysed correctly.

Is there a way to bring in sales_tax_rate?

How do your other app partners handle this scenario?

Thanks

8

Hi Nishit,

For native currency bills, if you set the value of VAT using sales_tax_rate, then you’ll be able to retrieve this in subsequent API requests. For foreign currency bills, the only option is to set the reclaimable VAT as an amount in GBP – this is to make it clear that the only VAT you should be entering here to reclaim is UK VAT, which we would expect to be shown in GBP on the supplier’s invoice (rather than being a percentage). This article on our Knowledge Base explains it in more detail. Although you could possibly work out the UK VAT percentage from the manual_sales_tax_amount (taking into account the correct currency exchange rate), I suspect it might not be helpful to the accountant to see it as a proportion of the total bill value.

Does this answer your question or am I misunderstanding your use case here?

Best wishes,

Ewa

9

Hi Ewa

Thank this helps me a little further

But having spoken to our accountant i have been advised on VAT it is the geographical location of the country and whether we have a VAT number which would determine the VAT reclaimable rather than the currency of the bill

EXAMPLE

For example a UK registered business who charges VAT but for some reason invoices its UK customers in dollars surely in this scenario their customers are still able to reclaim the VAT

Another example if a UK VAT registered business buys from an EC country then in that case regardless of the currency our customer would not be charged the VAT as long as a VAT number was given to the supplier in that EC country

Please can i ask you to check with you accountant at Free agent (Emily) and advise how this would be handled both from an accounting and the way Free agent API works

Thanks
Nishit

10

Hi Nishit,

But having spoken to our accountant i have been advised on VAT it is the geographical location of the country and whether we have a VAT number which would determine the VAT reclaimable rather than the currency of the bill

EXAMPLE

For example a UK registered business who charges VAT but for some reason invoices its UK customers in dollars surely in this scenario their customers are still able to reclaim the VAT

That’s absolutely correct, and you do get the option to enter reclaimable VAT on multi-currency bills in FreeAgent, however you can only do it by specifying an amount (manual_sales_tax_amount) rather than a rate. I’ve clarified this further with Emily who says:

We allow “amount” for VAT Reclaimable because the VAT we’re allowing you to reclaim here is any UK VAT entered on the bill, rather than local VAT in your supplier’s country. Because the supplier might have used a different £ exchange rate to the automatic one FreeAgent uses, we allow customers to enter an amount for UK VAT Reclaimable in £ sterling, which would be the amount indicated on the supplier’s bill.

Another example if a UK VAT registered business buys from an EC country then in that case regardless of the currency our customer would not be charged the VAT as long as a VAT number was given to the supplier in that EC country

Here Emily’s advice is as follows:

For the second part, about the UK VAT registered business buying from an EU country, we allow users to choose “EC Goods” if the bill has been zero-rated by their supplier, or “EC Services” if the bill is outside the scope of UK VAT and the reverse charge applies. Zero-rated means 0% VAT is charged, outside the scope of VAT means no VAT is charged - which may be arithmetically the same, but legally they’re not. That’s why we provide the “EC Goods” and “EC Services” options for costs.

On the API side of things, in the first case (bill zero-rated by the supplier), you’d pass ec_status with the value of EC Goods, and in the second, (bill outside the scope of UK VAT), you’d pass in "ec_status": "EC Services" in your request body. In both scenarios you can include "sales_tax_rate": 0.00 (although you don’t have to, as it will be correctly handled by default).