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VAT - box 7

Q: My client is an architect but his workload requires him to outsource work on occasion. He uses other architect firms who are not VAT registered. In our mind the supplies to my client are neither zero rated nor exempt, so do they need to appear in Box 7? If so, we are not sure how we should code it.

A: In short yes. The supplies are still purchases/expenses of the business so will need to be reported in box 7 of the VAT return irrespective of whether VAT is or isn’t charged by the supplier. You are correct that these supplies are neither zero rated nor exempt but in fact simply no VAT applicable because, presumably, the supplier is not required to be VAT registered as operating under the VAT threshold. With regards to software coding this will vary between different software versions; in the first instance you should always refer to the software guidance and/or software provider. As long as the purchase value appears in box 7 however, and no VAT is reclaimed against the transaction in box 4, HMRC will be satisfied.