Proforma Invoices/NAV Prepayments

iank

In the UK, a Proforma Invoice is merely a request for payment and does not represent a legal tax invoice. Therefore no VAT is recognised in relation to it.

As such, is it possible to configure Prepayments in such a way that the VAT does not become realized until the full invoice is posted?

So far I have managed to get it so that the VAT is realized at the point of payment of the proforma invoice however this is still not compliant with UK VAT legislation.

Any ideas?

udayrmer

You mean that Proforma only contains amount w/o taxes, then payment will received on basis of proforma will contain only Base amount ?????

Please clear

iank

The proforma request payment for the entire amount of the invoice (including taxes) i.e. Base + VAT.

The difference is in the treatment of the VAT. The VAT for the transaction should not appear in a VAT return until the final invoice for the goods/services has been issued.

Does that help?

David_Singleton

Hi Ian,

its many years since I did a Navision implementation in the UK, but as I remember it.

As you say a UK Proforma invoice is very different to other UK countries, and definitely standard Nav pre-payment does not handle the UK legal requirements. From memory the law states that VAT is Payable at either the date of shipment or date of invoice which ever comes first. So if you are just getting money from the customer you don't have to charge VAT till the goods are shipped. BUT as I recall there is also a stipulation that if you charge the customer VAT, then you must pay that VAT in that same VAT period. So in our case if you are charging the VAT you need to pass it on.

Pre-Payemnts were not in Navision when I last implemented in The UK, so what we would do was create an order with VAT for the full amount. Then add two GL lines the first for the Nett amount. Then bill only that one GL line, thus creating an invoice for the full amount less tax. Then create a reversing line and when you ship the goods you create an invoice only for VAT.

ANyway I have never seen UK -Pre-Payments, but I always had assumed they had localized it to UK VAT law.

iank

Hi David,

Thanks for your response. That's correct. In essence the prepayment invoice would not contain VAT but would be requesting payment for the VAT inclusive amount of the order. I believe that the stipulation would be that if the prepayment invoice showed the VAT seperately then it would be liable in that period but we're not raising a VAT invoice, just a request for payment.

I have seen modifications in the past which just creates a new document layout on top of a sales quote but if the prepayments functionality was compliant it would work really well as it would prevent a sales order from being processed outside of the payment terms for that customer and enables full traceability of the transactions. I'm not a believer in modification for modifications sake

Really I think it's going to have to be modified somewhere down the line in order to be compliant, it's just a shame that it isn't already.

Thanks for your help anyway

whizzergo

The thread has been dead a while but unfortunately this issue appears to persist.

In the UK our vendors provide proforma invoices with VAT and we pay them immediately. We can't however legally claim back the VAT until we're in receipt of the full VAT invoice.

Therefore we require that unrealised prepayment amounts for purchases (not sale) are realised upon posting of invoice, not payment.

Has anyone possibly found a solution within NAV for this yet?

We're already reversing G/L lines for another purpose so it would be very mess to go down that road, decent suggestion though it is.

Thanks