Posted by: IS | May 26, 2009

Fourth Schedule VAT

In Europe we have something called fourth schedule purchase tax on the purchase of certain services. In order to account for this correctly (as per the Revenue Commissioners during a recent revenue audit of one of our customers), a company should do the following:

  • Post the purchase invoice for say a purchase of 100.00.
  • Record a purchase tax detail transaction for say 10% – 10.00.
  • So far so good…alll standard GP…
  • Record a Sales Tax Detail transaction for 10%. (this is the issue, as you can’t use sales type tax details on a purchase transaction in GP)

In effect, even though the services are taxable, because they originate in other EU countries, no Tax is charged. The net tax on the transaction is zero. Most customers just record the transaction with a zero rate tax detail…however the Revenue say this is wrong…they should be recording the tax on the purchase and also recording a sales tax of the same amount so that the overall liability is zero.

This is so that when they make a tax return, the purchases side shows 10% and the sales side shows also 10%.

Has anyone got a workaround for this?…or has anyone developed an add on to handle this.

IF GP would allow use of sales and purchase tax details on the same transaction, it would sort this out, and handle all the GL postings etc, and produce a correct Company Period Taxes report correctly.

For the moment our customer has set up a new Purchases Tax Detail with a rate of 0% and an ID of ‘Fourth Schedule’. This seperates these transactions on the Tax report (Grouped by tax detail). They use this info to make a manual adjustment to their tax returns…ie they add say 10% of these transactions to the purchase tax liability, and also to the sales tax liability…thus getting the tax return as per the revenue requirement…but the revenue say that the underlying transactions in their accounting system should be correct also.


  1. […] Previous musings of accounting for VAT here: […]

  2. […] musings of accounting for VAT here: Published: Friday, September 04, 2009, 02:22 […]

  3. […] musings of accounting for VAT here: Published: Friday, September 04, 2009, 04:22 […]

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