As a small business in the UK, it is quite common for purchases to be made for goods and services from the EU, be that software or actual goods through Amazon and other online purchases ...
Sage has a handy calculator you can use. This allows you to go through answering questions about your purchase which you can use to determine which code you need to use as mentioned in my last blog post.
The first complication is making sure what your buying is a Service or is Goods. Normally computer software is considered to be goods, even though it can feel like a service! So, in my first example, I ran through the Sage Tax Code checker for goods purchased from abroad (outside of the UK), for example, the Netherlands that are not covered by the Northern Ireland Protocol. The VAT code is different depending on if the consignment value exceeds the import reverse charge threshold which at the time of writing is £135. That adds a complication as the code you use might change depending on how much you buy at any one time.
If the import exceeds the £135 threshold then you also need to say if you are using postponed VAT accounting, which is another level of complication. This basically allows you to account for the VAT on your VAT return rather than having to pay the VAT to the importer as they arrive at the border which is what was done previously.
This is in an attempt to improve cash flow for you at this difficult time. There are so many layers to this. So, If you are using the postponed VAT accounting for goods greater the £135 (not Northern Ireland) then you use T18 in Sage as your VAT code which is Import of Goods Postponed VAT. If you are NOT using Postponed VAT then it is T19 which is Import of Goods VAT not postponed.
If the value of the goods is less than £135 then you don't need to worry about the postponed VAT, and you would use code T17 for Import of Goods under the import reverse charge threshold. This is much simpler and probably applies to many purchases from companies like Adobe and Microsoft and other software providers.
Always look at the invoices though, and double-check what VAT codes they are using as many companies are switching to invoicing from inside the UK going forward in order to reduce admin costs so each invoice should be looked at and considered on its own merits and assumptions can't be made since 1st January.
So, my best advice to you is this: if you are struggling then seek help and advice from your accountant if you can, although they are probably just as confused. Do your best to use the correct codes. As with any changes, HMRC usually has a soft touch if you do things wrong when the systems are changing, especially at this difficult time.
If anything I've written here resonates with you, call me on 01604 420057 and let's see how we can help you.