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
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).