Introduction
Some business customers must not be charged value-added tax (VAT) by you: they account for it themselves (the reverse charge), or they belong to the same tax group as your company (a fiscal unity). The app handles both with three yes/no switches on the customer's Financial tab, headed VAT reverse charge, VAT reverse charge ignore thirty days and VAT fiscal unity. You set them once per customer. From then on every price the app works out for that customer's bookings — the booking total, the documents made from it and the invoice — either carries VAT at the normal rate or carries none.
The reverse charge has a catch: on an ordinary rental it only takes effect when the rental is longer than thirty days. Shorter rentals are charged VAT as normal, unless you also turn on the second switch.
You will use this when:
- a foreign business customer books a van for two months and should get an invoice without VAT
- a reverse-charge customer's two-week rental came out with VAT on it and you need to know whether that is right
- a sister company in your own tax group rents a car for a few days
- your finance person asks you to set a new corporate customer up "for reverse charge"
Words used on this screen
| The screen says | It means |
|---|---|
| VAT reverse charge | The customer pays the VAT to the tax office themselves, so your invoice shows none — on rentals over thirty days and on leases |
| VAT reverse charge ignore thirty days | Drop the thirty-day condition: the reverse charge then applies to this customer's rentals of any length |
| VAT fiscal unity | This customer belongs to your company's tax group, so no VAT is charged between you, whatever the length |
| Lease | A long rental billed in thirty-day cycles — see Set up a lease |
The switches are set on the customer, never on a booking or an invoice.
How to use
Configuration
There is no company-wide setting for this; each customer carries their own three switches, and a new customer starts with all three on No.
Before you start: changing the switches and pressing Save on the customer form needs a normal staff account. Which switch a customer needs is a tax question, not an app question — if you are not sure, ask whoever handles VAT for your company before you change anything. The switches change the price of every booking of this customer that has not been invoiced yet.
Using the VAT switches
From the main menu open Customers, then click the Customers tile. Find the customer on the list headed Customer, click their row, and stay on the Financial tab, which is already open. The three VAT switches sit in the middle of the tab, below Pament terms and above on account?.
- Set VAT reverse charge to Yes for a business that accounts for its own VAT. A fourth row, VAT reverse charge ignore thirty days, appears directly under it. It is not there until the first switch is on.
- Leave VAT reverse charge ignore thirty days on No if the reverse charge should only cover rentals of more than thirty days and leases. Set it to Yes if it should cover every rental for this customer, however short.
- Set VAT fiscal unity to Yes only for a company in your own tax group. It applies to every rental, whatever the length.
- Press Save at the top right of the customer form. The switches are not stored until you do.
- Open one of the customer's bookings that has not been invoiced yet and check the total. The app works the price out again with the new switches.
To undo, set the switch back to No and press Save. Bookings not yet invoiced go back to carrying VAT the next time their price is worked out.
Which switch settings give which result on an ordinary rental, as opposed to a lease:
| Reverse charge | Ignore thirty days | Fiscal unity | Rental of 30 days or less | Rental of 31 days or more |
|---|---|---|---|---|
| No | — | No | VAT | VAT |
| Yes | No | No | VAT | No VAT |
| Yes | Yes | No | No VAT | No VAT |
| No | — | Yes | No VAT | No VAT |
A lease is treated as long in every case: a reverse-charge customer's lease invoices carry no VAT from the first cycle, even though each cycle is exactly thirty days.
Key details
Which days count. The app counts the days in the booking's contract period — the pickup and drop-off dates the customer agreed to, counted the same way the price counts them (see Change a booking's dates). The line is drawn after thirty: a thirty-day rental is charged VAT, a thirty-one-day rental is not. When the customer actually brings the vehicle back makes no difference.
A worked example. A reverse-charge customer, VAT reverse charge ignore thirty days on No, rents a van at €50 a day excluding VAT:
| Rental | Price excl. VAT | VAT at 21% | Customer pays |
|---|---|---|---|
| 30 days | €1,500.00 | €315.00 | €1,815.00 |
| 31 days | €1,550.00 | €0.00 | €1,550.00 |
| 10 days, ignore thirty days on Yes | €500.00 | €0.00 | €500.00 |
A fiscal-unity customer renting the same van for five days pays €250.00, with no VAT.
Reverse charge is checked first. If a customer has both VAT reverse charge and VAT fiscal unity on, a rental that qualifies for the reverse charge is treated as reverse-charged; one that does not falls through to the fiscal unity and still carries no VAT. Either way the VAT is zero.
Every line on the booking goes the same way. Rental, insurance, extras, mileage and fuel all lose their VAT together, and a cancellation fee on a cancelled booking follows the same rule. There is no way to keep VAT on some lines and not on others.
Nothing already invoiced changes. A booking that has not been invoiced picks up a change to the switches the next time its price is worked out. An invoice already made keeps the VAT it was made with, and the app does not go back and correct it.
The customer's country is never looked at. The app has no rule of its own for foreign customers, inside or outside the European Union. Only these three switches decide.
What to do next: open the customer's next booking and check its total before quoting a price. For a lease, follow Set how a lease is billed and Invoice and extend a running lease — each cycle's invoice follows the switches as they are on the day it is made.
Q&A
Why did a rental that was extended past thirty days keep the VAT on its first invoice? The app only invoices what has changed since the last invoice. If a thirty-day rental was invoiced with €315.00 VAT and the contract is then stretched to forty days, the next invoice adds the ten extra days (€500.00) without VAT, and the €315.00 on the first invoice stays. Nothing corrects it for you. Ask whoever handles invoicing for your company to credit the first invoice.
Why does a credit for a shortened rental show VAT that the customer never paid? The same thing in reverse. A thirty-five-day rental invoiced without VAT, then cut back to twenty-five days by changing the contract period, now counts as short. The credit for the ten days taken off is worked out at the normal rate, so it gives back €605.00 on €500.00 of rent. Check the amounts before the next invoice goes out and ask whoever handles invoicing to correct it.
Why is VAT still on the invoice for a reverse-charge customer? The rental is thirty days or shorter and VAT reverse charge ignore thirty days is on No. Either that is correct, or this customer should never be charged VAT whatever the length — then set the second switch to Yes, press Save and reopen the booking.
Why is a reverse-charge customer's lease charged VAT? The booking is no longer a lease: its is lease switch was set to No, so it is treated as an ordinary rental of its contract length. See Set up a lease for the switch.
Why is a rental without VAT although the customer returned the vehicle after two weeks? The contract period is still longer than thirty days, and the app counts the contract, not the days the vehicle was out. If the contract really was shortened, change the contract period on the booking — see Change a booking's dates — and read the answer about credits above first.
Where has the "ignore thirty days" switch gone? It is only shown while VAT reverse charge is on Yes. Set that back to Yes and it reappears with the value it had. While the first switch is No, the second has no effect.
Why is a customer outside the European Union charged VAT? The app does not look at the country. Ask whoever handles VAT for your company which switch this customer needs, then set it on the Financial tab.
Related pages: Set a customer's payment and invoicing terms for the rest of the Financial tab, and Set up a lease for turning a long booking into a lease.