UK VAT Settings with UK VAT calculator

Contents

Introduction

FBO One has a VAT calculator for the UK VAT rules. The logic on which the VAT calculator is based is represented in this flow chart:

VAT Flowchart

For a more detailed guide see the website of HM Revenue & Customs: http://www.hmrc.gov.uk/vat/forms-rates/rates/goods-services.htm

To be able to use the UK VAT calculator, some actions are required to set it up.

Setup custom properties

Five custom properties must be defined in Custom values (Administration) page:

  • IsCateringForUKVAT - Linked to the ‘Product’ table.

  • IsFuelWithReducedRateForUKVAT - Linked to the ‘Product’ table.

  • IsOperatingInternationalRoutesForUKVAT - Linked to the ‘Contact’ table.

  • IsStateInstitutionForUKVAT - Linked to the ‘Contact’ table.

  • ReducedRateForUKVAT - Linked to the ‘Product’ table.

Each custom property will have a single allowed value: ‘Yes'. The product or contact will either not have a value for the property, or it will have the value 'Yes’, indicating that the value applies.

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The values for these custom properties can now be assigned to the VAT code, products and debtor contacts where applicable.

Setup UK VAT rule group

Each FBO location in a FBO Network can be assigned to a VAT rule groups (Administration). The VAT rule group defines which VAT calculator is used for the FBO.

VAT calculator settings

  • LitresOfFuelAboveWhichHighVATApplies=2300 (default). Fuel quantity below this number is charged with Reduced VAT rate and anything above this standard rate will apply.

  • Consider destination for fuel=true; By using the setting 'Consider destination for fuel = false', the calculator will apply a high or low vat rate regardless of the destination, unless zero rated due to European Community member or client falling outside of VAT purposes (example US business)

    • By default the calculator is applying a zero rate in case the debtor/operator is an established UK business AND the flight destination is foreign.

  • MtowAboveForStateInstitutions=8000; Indicates the MTOW in kg for aircraft be a qualifying aircraft for state institution debtors.

  • DomesticStationGroupName=United Kingdom for VAT - Indicates which countries are treated as United Kingdom VAT treatment, allowing for multiple countries e.g. Isle of Man (for a contact’s ‘Country for VAT purposes’). This setting should match an existing station group see Station groups (Administration). If this setting is not added then the default will be United Kingdom only. Note: Administration country must also be United Kingdom.

  • Notice the VAT calculator settings (‘MtowAboveForStateInstitutions = 8000; LitresOfFuelAboveWhichHighVATApplies = 2300’)
    In addition to these settings, from 28 Jul 2015,  the VAT calculator has support to ignore the flight destination when charging VAT for fuel services (Consider destination for fuel=false).

Vat calculator settings example:

  1. In Menu | Administration | Back office | Administrations, assign the VAT rule group for every back office administration that issues UK invoices:


    Also set the ‘EC Reversed VAT Code’ and the ‘VAT code for the 'non-EU-business client' VAT exemption’ to the correct values

  2. A Reduced VAT Code must be defined with a percentage of 5% if it does not already exist. Go to Administration | Vat Codes and review. Note that the reduced VAT code needs to be assigned the custom value ReducedRateForUKVAT=Yes, so that the calculator can assign this rate to applicable fuel services.

Setup products

For each product, check the VAT rate, and whether it is airside or landside. To obtain an overall overview, go to the Reports in main menu bar, and select the product data summary report. In Excel, hide all columns that are not related to VAT.

To correct a product, search for it in the top-right main search box, and click ‘Edit Product’ to change the settings.

Also check the Is ‘EC Reversed VAT Applicable’ property for each product in a similar manner. To read more about EC reversed VAT check: EC reversed VAT logic.

 

Fuel

Go to the fuel product’s details page and click on ‘Edit product'. Scroll down to Custom values and add ‘IsFuelReducedRateForUKVAT | Yes’. Also check that the VAT Code is set to HIGH.

Catering

The next step is to ensure two catering products exist: One for airside and one for landside, since airside catering can be zero rated and landside catering cannot.

Assign the custom property ‘IsCateringForUKVAT | Yes’ for the airside catering product. The VAT calculator will zero-rate the catering that is marked ‘IsCateringForUKVAT | Yes’ for international flights.

Setup debtor and operator contacts

  • For UK based debtors that fly international routes a VAT number must be entered and the custom value 'IsOperatingInternationalRoutesForUKVAT | Yes' added for the UK VAT calculator to only charge VAT on landside products.

  • For state institution exemptions are made. To set operators as state institutions, go to the debtor -> 'Edit organization' and click the check box for state institution flights as described below.

  • Debtors outside the EU don't have to pay VAT on air-side services as long as they are a business. To make this distinction in FBO One between private customers and businesses the VAT number field is used. In this field something needs to be filled in to confirm the debtor is a business.
    This can be the VAT number if available, a company registration number or simply the text 'Is Non-EU business'.

  • There is a free-text remark field available with the name AOC/VAT Remark. Instruct your users to use this to document why they set any special options. Also note that for a contact, you can upload supporting documents as attachments to the contact's bulletin board.

State Institution example:

Non-EU business example:

For non-EU business, enter a proof of business in the VAT number field and set the Country for VAT purposes as applicable. This way, the EC-Reversed VAT logic will exempt this debtor for VAT.

All operators who fly international routes and who are UK based must be assigned the custom value 'IsOperatingInternationalRoutesForUKVAT | Yes'.

VAT codes on the invoice

FBO One can show the VAT Invoice codes instead of the VAT percentages. This way, it is clearer if the VAT rate is due to EC reversed VAT being applied, due to a zero rating or due to an exemption. Each of those 3 cases result no VAT being applied, but must be identifiable.

You can turn on this behavior by going to Menu | Administration | Application settings, and set the PrintVatInvoiceCode setting to true. You then can differentiate between Reversed VAT and Exempt VAT (Only when these VAT Invoice Codes are set, which is recommended).

If the EC reversed VAT code, Non-EU business exempt code or reduced rate VAT is not present in your system, you can create them by going to VAT codes (Administration) page and add a VAT code, and linking a percentage to the code. When all codes are in the system, the ‘VAT codes’ page in Administration should look like below: