Hello!
This has baffled me for quite a while: why do contacts have a charge-sales-tax setting? It seems to me that whether sales tax is charged is a property of the good or service being sold, and in some cases the contact’s country. I can’t see why it would be a property of the contact buying the good or service.
What happens if a contact buys something that has VAT on it and then another thing that doesn’t? As far as I can tell it’s not possible to reflect this in FreeAgent.
I would love to be enlightened 
Many thanks in advance!
Yours,
Andrew Stewart
–
https://doubleagent.io
Hello Andrew,
Thanks for posting; it’s a great question!
You’re absolutely right that it’s based on the good/service being bought or sold, and also the country of the contact.
Sometimes you may have clients for whom you may or may not need to add VAT to the invoice, depending on where you are delivering services to the client. So you have the option to charge VAT only if the client is based in the UK, which is the default, or always charge VAT, or never charge VAT.
For example, if you’re selling goods to this contact and they are outside the UK but inside the EU, you would set the “Charge VAT” option to “Always” (because VAT is being charged, just at a rate of 0%), however if you’re selling services to this contact the “Charge VAT” option would be “Only if contact is based in the United Kingdom” or “Never” because the sales are outside the scope of UK VAT.
In theory this cold be modelled a different way where these choices were made at an individual invoice/bill line item level, but in FreeAgent it is the contacts VAT option, their country, and the EC Status of the invoice/bill that powers the accounting output.
FreeAgent doesn’t currently support having items on the same invoice that are VATable and out of the scope of UK VAT (such as disbursements).
I hope that helps,
Cheers,
Stu McEwan
Core Services:API Product Manager
Hello Stu,
Thanks for the detailed answer! That all makes sense.
FreeAgent doesn’t currently support having items on the same invoice that are VATable and out of the scope of UK VAT (such as disbursements).
Does FreeAgent support having two invoices for the same contact, one with VATable items and the other with items out of the scope of UK VAT?
Cheers,
Andrew
Hello,
No problem, thanks also for your quick response.
Yes that’s absolutely possible. The contact-level VAT option can be changed at any time and will only impact new invoices created, leaving historical ones unchanged.
It’s worth noting that you can mix VAT rates (including exempt) on one invoice, just not with items out with the scope of VAT.
I hope that helps,
Cheers,
Stuart McEwan
Core Services:API Product Manager
Good to know, thanks again!
– Andrew