Box 2 on a VAT return can be the source of some confusion. According to guidance set out by HMRC Box 2 on your VAT return should be used to show any VAT on goods purchased from VAT registered business in other EC member states (B2B). Box 2 relates to goods and differs to the VAT reverse charge which covers services.

Working Out the Cost of Your EC Aquisitions

The first step in filling out Box 2 is to add up the costs of the goods you have purchased from your EC supplier along with any costs related to getting the goods to you such as packing, transport or insurance which they are responsible under their contract with you.

You need to include all goods you bought based on the tax point which is the earlier of:

  • The invoice date or;
  • The 15th day of the month following the one in which the goods were sent to you.

What to Enter Into Box 2 

As you have made a B2B transaction with a fellow VAT registered business, you will not have been charged VAT.  However HMRC wants to track what you are buying so need you to make entries onto your VAT return (the affect is nil on your VAT liability, its a form filling exercise).

Take the total cost of your EC Acquisitions and multiply them by the standard rate of VAT in the UK, currently 20%.

Obviously this now means you are liable to pay 20% on your purchases which is not correct, so you need to make a correcting entry to reclaim this amount in Box 4.

What to Enter Into Box 4

Into box four enter the amount of VAT you entered into box 2, this then reduces your VAT liability and zeros out the entry you made in box 2.

What to Enter Into Box 7 & 9

You must enter the cost of your EC purchases which you worked out in step one above into boxes 7 and 9.

An Example of Filling Out Your VAT Return with EC Acquisitions

A business has purchased £100 of goods from a EC business who is also VAT registered.  They will need to enter the following onto their VAT return:

  • Box 2 £20
  • Box 4 £20
  • Box 7 £100
  • Box 9 £100

If you are regularly make EC acquisitions then it will probably make sense to set up a cloud accounting package for yourself since it works all this out for you on your behalf (such as Xero or Quickbooks).

Anita is a Chartered Accountant, turned blogger and creator of the ever popular free Go Self Employed Email Mini Course, which has been completed by hundreds of attendees all over the UK. Using her 10 years experience in accounting, tax and operations for Small Businesses, Anita is on a mission to make finance simple for the self employed, so they can stop stressing about tax & finances and focus on building profitable businesses which will give them the lifestyle they dream of.