***DISCLAIMER***
The team at Link My Books are happy to provide users with technical assistance in applying tax rules to their Link My Books setup.  We are not Tax Advisors and so our advice and suggestions on the application of tax rules cannot be construed as tax advice.  We highly recommend that users seek advice from qualified accountants for their tax compliance.
 

Before reading this article it might be wise to start with the What should be included in my UK VAT return? article.

Then the article on Do I need to submit an EC Sales list to HMRC for my Zero Rated EC Business sales? too. After that you can come back to this article?

EC Inventory Movement

As part of your EC Sales List submission to HMRC you need to take into account any EC fulfilment transfers made.
(This only applies if Amazon is transferring inventory between EU fulfilment centres on your behalf through either their PAN EU program or by allowing them to store your inventory in other countries)

You would also need to include details of these inventory movements in your UK VAT return.

These would also need to be recorded as follows. 

Goods imported to the UK from one of your other EU VAT registered countries

These are classed as Intra EU B2B Purchase of Goods (even the the two business are really just your one business with two different VAT numbers). The total cost price amount of any transfers of inventory from EU fulfilment centres to UK fulfilment centres should be included in this section.

These would usually incur the following tax rate:
Xero - EC Acquisitions (20%)
QuickBooks - 20% ECG (EC Goods Standard)

Using the above tax rates means that he following will be recored on the VAT return:
+/- VAT at 20% to Box 2 and 4, +/- Net Purchase to Box 7 and 9

Goods exported from the UK to one of your other EU VAT registered countries

These are classed as Intra EU B2B Supply of Goods (even the the two business are really just your one business with two different VAT numbers). The total cost price amount of any transfers of inventory from UK fulfilment centres to other EU fulfilment centres should be included in this section.

These would usually incur the following tax rate:
Xero -  Zero Rated EC Goods Income
QuickBooks - 0.0% ECG (EC Goods Zero-rated 0%)

Using the above tax rates means that he following will be recored on the VAT return:
Net Sale to Box 6 & 8

How do I get these figures into Xero?

  1. Create some new accounts in your chart of accounts for EC Inventory Movements
  2. Each month create a new invoice for each of your EC Imports
  3. Each month create a new bill for your EC Exports


Step 1 - Create some new accounts in your chart of accounts for EC Inventory Movements

To account for your EC Inventory Movements in Xero you will first need to create an account for EC Imports and an account for EC Exports.

You could for example use:

"Transfer of own goods - In from other EC Countries" for your imports with the account type being an "Expense" account, as shown in this screenshot:


"Transfer of own goods - Out to other EC Countries" for your exports with the account type being a "Sales" account, as shown in this screenshot:


Step 2 - Each month create a new invoice for each of your EC Imports

Once you have created some accounts for EC imports and exports then you need to create a bill outlining the EC Imports each month.

Take the figures from the "Imports" column on the Link My Books EC Inventory Movements page as shown in this screenshot:

You will only need to create a single bill for all of your imports. Make the bill out to a customer name such as "Your Company Ltd" and date it the last day of the month.

Then for each country you will need to make two line items. The first line is for the amount shown in the imports column for Spain £16.20, the account is the one you just created for EC Imports and the tax rate is EC Acquisitions (20%).

The second line is for the reverse of that, so -£16.20, the account is the the same and the tax rate is No VAT.

See below example:

Once you have done this for each of the EC countries you have imports from you should end up with something like this:

Step 3 - Each month create a new bill for your EC Exports

Take the figures from the "Exports" column on the Link My Books EC Inventory Movements page as shown in this screenshot:

You will need to create a single invoice for each of your exports. Make the invoice out to a customer name such as "Your Company Ltd - DE" and date it the last day of the month.

Then you need to add two line items. The first line is for the amount shown in the imports column for Germany £2,168.10, the account is the one you just created for EC Imports and the tax rate is Zero Rated EC Goods Income.

The second line is for the reverse of that, so -£2,168.10, the account is the the same and the tax rate is No VAT.

See below example:

Remember that you should end up with an invoice for each of the EC countries you exported inventory to.

How will this look on my VAT return?

Once you have completed the above you can check that it has all worked properly by going to your VAT return in Xero.

You will see that the new bill and invoices is generating figures that are being included in the relevant VAT return boxes as mentioned at the top of this article.

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