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VAT: Latest from the courts – Pole Tax?

By   20 December 2016
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(Pardon the dreadful pun).

The Court of Appeal case of Wilton Park Ltd and Secrets Ltd

Background

The appellant operated an “exotic dancing” club which featured table and lap dancing.  It received commission from self-employed dancers which was treated as exempt from VAT.  This was on the basis that the commissions were charged on redemption of vouchers (known as Secrets Money) such that it represented the services of dealing with security for money.  Customers were able to purchase Secrets Money with the addition of a 20% commission. The vouchers were used to pay individual dancers who subsequently needed to exchange the vouchers for cash.  The taxpayer charged a 20% fee for such a conversion.

The issue

The issue was whether face-value vouchers issued by appellant companies constituted “…any security for money” within the VAT Act 1994, Schedule 9, Group 5, item 1.   HMRC argued that the redemption of the vouchers was part of a taxable supply of performance facilitation services by the taxpayer and thus standard rated.

Decision

Not surprisingly, the CoA dismissed the appeal, agreeing with both the FTT and UT in holding that the provision of the club’s facilities formed part of the consideration for the commission an consequently was not an exempt supply.

Commentary

This appears a rather desperate appeal, and there still remains the possibility that the taxpayer could take the matter to the Supreme Court.  It illustrates that simply putting in a mechanism which adds a degree of complexity does not affect the overriding VAT analysis.  What was provided and what was paid for here seems reasonably apparent and it is quite a leap to consider the structure was simply exchanging vouchers for cash.  It also occurs that this would be a very straightforward way for other businesses to avoid paying VAT if the appellant had been successful.

For more on this subject (should that be your thing…….) a read of the Spearmint Rhino case not only explores the structure/relationship between dancers and club owners but is also rather good entertainment and provides an amusing yet illustrative overview of the agent/principal issue (and is not salacious in the least…..).

Oops! – Top Ten VAT howlers

By   16 December 2016
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I am often asked what the most frequent VAT errors made by a business are. I usually reply along the lines of “a general poor understanding of VAT, considering the tax too late or just plain missing a VAT issue”.  While this is unquestionably true, a little further thought results in this top ten list of VAT horrors:
  1. Not considering that HMRC may be wrong. There is a general assumption that HMRC know what they are doing. While this is true in most cases, the complexity and fast moving nature of the tax can often catch an inspector out. Added to this is the fact that in most cases inspectors refer to HMRC guidance (which is HMRC’s interpretation of the law) rather to the legislation itself. Reference to the legislation isn’t always straightforward either, as often EC rather than UK domestic legislation is cited to support an analysis. The moral to the story is that tax is complicated for the regulator as well, and no business should feel fearful or reticent about challenging a HMRC decision.
  2. Missing a VAT issue altogether. A lot of errors are as a result of VAT not being considered at all. This is usually in relation to unusual or one-off transactions (particularly land and property or sales of businesses). Not recognising a VAT “triggerpoint” can result in an unexpected VAT bill, penalties and interest, plus a possible reduction of income of 20% or an added 20% in costs. Of course, one of the basic howlers is not registering at the correct time. Beware the late registration penalty, plus even more stringent penalties if HMRC consider that not registering has been done deliberately.
  3.  Not considering alternative structures. If VAT is looked at early enough, there is very often ways to avoid VAT representing a cost. Even if this is not possible, there may be ways of mitigating a VAT hit.
  4.  Assuming that all transactions with overseas customers are VAT free. There is no “one size fits all” treatment for cross border transactions. There are different rules for goods and services and a vast array of different rules for different services. The increase in trading via the internet has only added to the complexity in this area, and with new technology only likely to increase the rate of new types of supply it is crucial to consider the implications of tax; in the UK and elsewhere.
  5.  Leaving VAT planning to the last minute. VAT is time sensitive and it is not usually possible to plan retrospectively. Once an event has occurred it is normally too late to amend any transactions or structures. VAT shouldn’t wag the commercial dog, but failure to deal with it at the right time may be either a deal-breaker or a costly mistake.
  6.  Getting the option to tax wrong. Opting to tax is one area of VAT where a taxpayer has a choice. This affords the possibility of making the wrong choice, for whatever reasons. Not opting to tax when beneficial, or opting when it is detrimental can hugely impact on the profitability of a project. Not many businesses can carry the cost of, say, not being able to recover VAT on the purchase of a property, or not being able to recover input tax on a big refurbishment. Additionally, seeing expected income being reduced by 20% will usually wipe out any profit in a transaction.
  7.  Not realising a business is partly exempt. For a business, exemption is a VAT cost, not a relief. Apart from the complexity of partial exemption, a partly exempt business will not be permitted to reclaim all of the input tax it incurs and this represents an actual cost. In fact, a business which only makes exempt supplies will not be able to VAT register, so all input tax will be lost. There is a lot of planning that may be employed for partly exempt businesses and not taking advantage of this often creates additional VAT costs.
  8.  Relying on the partial exemption standard method to the business’ disadvantage. A partly exempt business has the opportunity to consider many methods to calculate irrecoverable input tax. The default method, the “standard method” often provides an unfair and costly result. I recommend that any partly exempt business obtains a review of its activities from a specialist. I have been able to save significant amounts for clients simply by agreeing an alternative partial exemption method with HMRC.
  9.  Not taking advantage of the available reliefs. There are a range of reliefs available, if one knows where to look. From Bad Debt Relief, Zero Rating (VAT nirvana!) and certain de minimis limits to charity reliefs and the Flat Rate Scheme, there are a number of easements and simplifications which could save a business money and reduce administrative and time costs.
  10.  Forgetting the impact of the Capital Goods Scheme. The range of costs covered by this scheme has been expanded recently. Broadly, VAT incurred on certain expenditure is required to be adjusted over a five or ten year period. Failure to recognise this could either result in assessments and penalties, or a position whereby input tax has been under-claimed. The CGS also “passes on” when a TOGC occurs, so extra caution is necessary in these cases.

So, you may ask: “How do I make sure that I avoid these VAT pitfalls?” – And you would be right to ask.

Of course, I would recommend that you engage a VAT specialist to help reduce the exposure to VAT costs!

VAT Splitting a business to avoid registration: Disaggregation

By   8 December 2016
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I have a cunning plan to avoid registering for VAT…….

….I’ll simply split my business into separate parts which are all under the VAT registration turnover limit – ha!

I’ve heard this said many a time in “bloke in the pub” situations. But is it possible?

You will not be surprised to learn that HMRC don’t like such schemes and there is legislation and case law for them to use to attack such planning known as “disaggregation”. This simply means artificially splitting a business.

What HMRC will consider to be artificial separation:

HMRC will be concerned with separations which are a contrived device set up to circumvent the normal VAT registration rules. Whether any particular separation will be considered artificial will, in most cases, depend upon the specific circumstances. Accordingly it is not possible to provide an exhaustive list of all the types of separations that HMRC will view as artificial. However, the following are examples of when HMRC would at least make further enquiries:

Separate entities supply registered and unregistered customers

In this type of separation, the registered entity supplies any registered customers and the unregistered part supplies unregistered customers.

Same equipment/premises used by different entities on a regular basis

In this type of situation, a series of entities operates the same equipment and/or premises for a set period in any one-week or month. Generally the premises and/or equipment is owned by one of the parties who charges rent to the others. This situation may occur in launderettes and take-aways such as fish and chip shops or mobile catering equipment.

Splitting up of what is usually a single supply

This type of separation is common in the bed and breakfast trade where one entity supplies the bed and another the breakfast. Another is in the livery trade where one entity supplies the stabling and another, the hay to feed the animals. There are more complex examples, but the similar tests are applied to them too.

Artificially separated businesses which maintain the appearance of a single business

A simple example of this type of separation includes; pubs in which the bar and catering may be artificially separated. In most cases the customer will consider the food and the drinks as bought from the pub and not from two independent businesses. The relationship between the parties in such circumstances will be important here as truly franchised “shop within a shop” arrangements will not normally be considered artificial.

One person has a controlling influence in a number of entities which all make the same type of supply in diverse locations

In this type of separation a number of outlets which make the same type of supplies are run by separate companies which are under the control of the same person. Although this is not as frequently encountered as some of the other situations, the resulting tax loss may be significant.

The meaning of financial, economic and organisational links

Again each case will depend on its specific circumstances. The following examples illustrate the types of factors indicative of the necessary links, although there will be many others:

Financial links

  • financial support given by one part to another part
  • one part would not be financially viable without support from another part
  • common financial interest in the proceeds of the business

Economic links

  • seeking to realise the same economic objective
  • the activities of one part benefit the other part
  • supplying the same circle of customers

Organisational links

  •  common management
  • common employees
  • common premises
  • common equipment

HMRC often attack structures which were not designed simply to avoid VAT registration, so care should be taken when any entity VAT registers, or a conscious decision is made not to VAT register. Registration is a good time to have a business’ activities and structure reviewed by an adviser.

As with most aspects of VAT, there are significant and draconian penalties for getting registration wrong, especially if HMRC consider that it has been done deliberately to avoid paying VAT.

VAT – EC proposal for new rules for e-commerce and online businesses

By   1 December 2016
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The EC has announced measures to simplify VAT for e-commerce businesses in the EU. The proposals will purportedly allow consumers and businesses to buy and sell goods and services more easily online.

 New VAT rules for sales and goods and services online

Currently, online traders have to register for VAT in all the Member States to which they sell goods. Often cited as one of the biggest barriers to cross-border e-commerce, these VAT obligations cost businesses around €8,000 for every EU country into which they sell. We are now proposing that businesses make one simple quarterly return for the VAT due across the whole of the EU, using the online VAT One Stop Shop. This system already exists for sales of e‑services such as mobile phone apps, and has been proven successful with more than €3 billion in VAT being collected through the system in 2015. Administrative burdens for companies will be reduced by a staggering 95%, giving an overall saving to EU business of €2.3 billion and increasing VAT revenues for Member States by €7 billion.

Simplifying VAT rules for micro-businesses and start-ups

A new annual threshold of €10,000 in online sales will be introduced under which businesses selling cross-border can continue to apply the VAT rules they are used to in their home country. This will make complying with VAT rules easier for 430,000 companies across the EU, representing 97% of all micro-business trading cross‑border. A second new yearly threshold of €100,000 will make life easier for SMEs when it comes to VAT, with simplified rules for identifying where their customers are based. The thresholds could be applied as early as 2018 on e‑services, and by 2021 for online goods. Other simplifications would allow the smallest businesses to benefit from the same familiar VAT rules of their home country, such as invoicing requirements and record keeping. The first point of contact will always be with the tax administration where the business is located and businesses will no longer be audited by each Member State where they have sales.

VAT fraud from outside the EU – Removal of Low Value Consignment (LVC) relief

Small consignments imported into the EU that are worth less than €22 are currently exempt from VAT. With around 150 million parcels imported free of VAT into the EU each year, the EC says that this system is open to massive fraud and abuse, creating major distortions against EU business. Firstly, EU businesses are put at a clear disadvantage since unlike their non-EU competitors, they are liable to apply VAT from the first eurocent sold. Secondly, imported high-value goods such as smartphones and tablets are consistently undervalued or wrongly described in the importation paperwork in order to benefit from this VAT exemption. The Commission has therefore decided to remove LVC relief

Equal rules for taxing e-books, e-newspapers and their printed equivalents

Current rules allow Member States to tax printed publications such as books and newspapers at reduced rates or, in some cases, super-reduced or zero rates. The same rules exclude e-publications, meaning that these products must be taxed at the standard rate. Once agreed by all Member States, the new set-up will allow (but not oblige) Member States to align the rates on e-publications to those on printed publications.

Action

Please contact us if any of the above affects your business or your client’s businesses.

VAT Snippet – e-supplies to Russia

By   1 December 2016
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New VAT rules for B2C supplies to Russian recipients

If your business, or your client’s business provide electronically supplied services to private consumers* in Russia new rules will require foreign (“non-established“) businesses to register and pay VAT on their supplies.

These rules will come into effect from 1 January 2017.

Supplies of such services will be subject to the Russian standard VAT rate of 15.25% of gross revenue.

For the purposes of this legislation electronically supplied services include (but are not limited to):

  • e-books
  • streaming of music and film
  • online access to games and download of games to electronic devices
  • services of social networking sites
  • cloud computing
  • hosting of websites
  • access to search engines
  • internet service providers
  • broadcasting of TV or radio channels
  • online advertising
  • data storage,
  • and other similar services

This definition broadly follows the definition for EU supplies.

Quarterly VAT returns will be required, however, there will be no right to recover input tax on these returns.

Place of belonging

As with any e-sales, it is important to have a procedure in place in order to establish the place of belonging of all customers as this will dictate what (if any) VAT is applicable, and to which authority payment should be made.  In broader terms, the rules for Distance selling must also be adhered to. Guide here 

* Russian definition of place of an individual customer – A “private consumer” is deemed to be in Russia if his/her living place is in Russia; or if he/she purchased the service by using a Russian bank (or a Russian electronic money operator), a network address registered in Russia, or a phone number with the Russia’s country code.

This follows an international trend as may be seen with similar developments here

If you are affected by this new VAT legislation, please contact us.  We have a worldwide network which can take the pain out of international VAT compliance and avoid a business inadvertently triggering swingeing penalties and interest overseas. Please see further details of this service here

VAT – Autumn Statement. Unwelcome changes to the Flat Rate Scheme

By   24 November 2016
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Autumn Statement

The Flat Rate Scheme (FRS) is a very helpful simplification of VAT for smaller businesses. It reduces paperwork and can result in a tax benefit for those who use the scheme. Details of the FRS are at the end of this article.

In the Autumn Statement, the Chancellor has announced changes to the FRS to be introduced from 1 April 2017. Under the misleading heading: “Tackling aggressive abuse of the VAT Flat Rate Scheme” the technical note here

This sets out a new FRS rate for businesses with “ with limited costs”.

Broadly, if a business has VAT inclusive expenditure on goods of either:

  • less than 2% of their VAT inclusive turnover in a prescribed accounting period
  • greater than 2% of their VAT inclusive turnover but less than £1000 per annum if the prescribed accounting period is one year

The above excludes capital expenditure, food or drink for consumption by the business or its employees, and vehicles, vehicle parts and fuel.

Then they will be required to use a FRS rate of 16.5% rather than the rate currently applicable.

There will be anti-forestalling provisions in place to avoid manipulation of timing.

What this means

Assume a business is currently using the 12% flat rate:

100 + 20% VAT = 120 x 12% = 14.4 VAT due

120 x 16.5% = 19.8 VAT due at the new rate

Outside the FRS VAT due = 20 VAT due (but input tax recovery available to offset)

Commentary

This will unfortunately affect many small businesses who have no intention and are certainly not involved in “aggressive abuse”. It appears just another example of, as The Times leader once said of the Rolling Stones case “Who breaks a butterfly upon a wheel?”*

 

Flat Rate Scheme
The Flat Rate Scheme is designed to assist smaller businesses reduce the amount of time and complexity required for VAT accounting. The Flat Rate Scheme removes the need to calculate the VAT on every transaction. Instead, a business pays a flat rate percentage of its VAT inclusive turnover. The percentage paid is less than the standard VAT rate because it recognises the fact that no input tax can be claimed on purchases. The flat rate percentage used is dependent on a business’ trade sector.
A business is eligible for this scheme if its estimated taxable turnover in the next year will not exceed £150,000. Once using the scheme, a business is permitted to continue using it until its income exceeds £230,000.
If eligible, a business may combine the Flat Rate Scheme with the Annual Accounting Schemes, additionally, there is an option to effectively use a cash basis so there is no need to use the Cash Accounting Scheme. There has been recent case law on the percentage certain businesses’ use for the FRS, so it is worth checking closely.  There is a one percent discount for a business in its first year of trading.
Advantages
  • Depending on trade sector and circumstances may result in a real VAT saving
  • Simplified record keeping; no requirement to separate out gross, VAT and net in accounts
  • Fewer rules; no issues with input tax a business can and cannot recover on purchases
  • Certainty of knowing how much of income is payable to HMRC
Disadvantages
  • No reclaim of input tax incurred on purchases
  • If you buy a significant amount from VAT registered businesses, it is likely to result in more VAT due
  • Likely to be unattractive for businesses making zero-rated or exempt sales because output tax would also apply to this hitherto VAT free income
  • Low turnover limit

* For those of a literary bent, the original quote is from Alexander Pope’s Epistle to Dr Arbuthnot of January 1735.

VAT Latest from the courts – exemption for sporting facilities by an eligible body

By   8 November 2016
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St Andrew’s College, Bradfield

This Upper Tribunal case demonstrates the importance of getting the structure right. Full case here

Overview

Exemption exists for an eligible body making certain supplies of sporting services.

Background

St Andrew’s College is a boarding school and a registered charity.  It is the representative member of a VAT group which also included two subsidiary companies. The companies provided facilities for playing sport and the group intended to treat these as exempt supplies.  HMRC challenged the intended treatment on the basis that the subsidiaries did not qualify as eligible bodies via VAT Act 1994, Schedule 9, Group 10 (exemption related to sport, sports competitions and physical education). It was agreed that all of the other criteria were met, so the case turned on the definition of an eligible body.  It was common ground that the College, as an educational charity, was itself an eligible body. Even though, as the representative member of the VAT group, the College was treated as making all supplies actually made by the subsidiaries, that did not mean that the supplies were exempt.

Decision

In order to be regarded as an eligible body the subsidiaries were required to be a non-profit making body.  What was relevant here was whether the subsidiaries (themselves) had specific restrictions on their ability to distribute any profit that they made.  The UT formed the view that there was no specific restriction and that although profits were only covenanted up to the College this was insufficient to meet the test in Group 10 Note (2A).  It was also found that the deeds of covenant did not, of themselves, establish that the subsidiaries could make distributions only to non-profit making bodies.

Consequently, the subsidiaries failed to qualify for exemption and that the First Tier Tribunal correctly found that output tax was due on the income from provision of sporting facilities.

Commentary

This case highlights the importance of putting in place a correct structure and to ensure that it reflects the intention of the supplier.  One may see that in this scenario it would have been relatively simple to arrange matters to accurately reflect the aims of the group.  Care would have been required in drafting documentation etc as matters stood, or rearranging the supply chain.

It should also be noted that there are specific anti-avoidance provisions in place for certain suppliers of sporting services (although not in issue here). Advice should be taken at an early stage in planning to ensure that if exemption is desired, that it is achieved if possible.

Latest from the courts: Excise Duty – against which party may an assessment be raised?

By   19 October 2016
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A little “light” relief from VAT.  Indirect taxes extend to Customs and Excise Duties (as well as IPT and various other “lower profile” taxes) and we are able to assist with all of these.

In an interesting Excise Duty case; B & M Retail Limited (B & M) the Upper Tribunal were asked whether an assessment for Customs Duty due on wine and beer could be issued to an entity “down the chain” to an entity which was holding goods at a given time.

Background

HMRC detained the relevant the goods under The Customs & Excise Management Act 1979 (“CEMA”) Section 139 on the grounds that, in their judgment, on the balance of probabilities, Excise Duty had not been paid on the goods. Under B & M’s terms and conditions of business its suppliers were required to warrant that the sale of alcohol to B & M was on a “Excise Duty paid” basis.

The First Tier Tribunal (FTT) decided that despite an HMRC investigation resulting in the fact that they were not satisfied that duty had been paid on the goods, B & M was not responsible for the duty (and subsequent penalties) as the goods had passed through other various entities before they reached the appellant.  The decision was based on the fact that the duty point must have arisen before the goods reached B & M and consequently, the duty was payable by someone further up the supply chain and not simply by the entity which was holding the Excise Duty goods at the Excise Duty point.

Decision

However, the Upper Tribunal disagreed with the FTT and overturned the verdict.  The Upper Tribunal stated that “… the recognition by HMRC that one or more other Excise Duty points must, in principle, have been triggered before B & M received the relevant goods did not preclude HMRC from assessing B & M for excise duty …”.  The Upper Tribunal did, however, remit the case to the First Tier Tribunal to review the evidence to ensure that the assessment is in time and that, as a matter of fact, the Excise Duty due on the beer and wine remains unpaid.

Conclusion

It would appear that this decision currently gives HMRC the right to raise an assessment for duty and penalties anywhere along the supply chain when an entity is holding the goods, even though a “previous” entity may have been responsible for the payment. This is not * * polite cough * * small beer as the amount in question was £5,875,143 of duty and a penalty of £1,175,028.  This is helpful to HMRC as, in this instant case, it would appear that entities further up the supply chain were either not registered, or became deregistered, making it more difficult for HMRC to recover the Duty due.

It is important for every importer to be clear about the Excise Duty position and to carry out detailed due diligence on the relevant shipment.  It is now not possible to escape an assessment by demonstrating that a third party is responsible for the payment of the duty.

VAT – Latest from the courts: treatment of web-based introductions

By   14 September 2016
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First Tier Tribunal (FTT) – What intermediary services may be exempted?

Background

The provision of intermediary services (putting those who require a financial product in touch with those who provide them) is exempt from VAT if certain conditions apply.  Broadly, the requirement is mainly the need to provide something more than just the introduction, eg; negotiation of credit. If a business acts as a mere conduit or in an advertising capacity its supplies will be standard rated.

The case

In the FTT case of Dollar Financial UK Limited TC05334 (Dollar) the applicant received web-based services from overseas The Reverse Charge was applied to these supplies (details of the Reverse Charge here). Dollar provides “payday loans” which are themselves exempt from VAT.  As Dollar was unable to recover all of the VAT on the Reverse Charge it represented a VAT cost to the business.  However, if the supplies were exempt there would be no need to apply the Reverse Charge and so the loss would be avoided.

The FTT was required to consider what precisely the suppliers (so called lead generators) provided to Dollar in return for a commission based on the value of the loan.  The lead generators operated websites which are mainly comparison sites and which referred potential borrowers to loan providers such as Dollar. HMRC formed the view that these services did not amount to intermediary services and hence were subject to the Reverse Charge.

The FTT ruled that there were differences between the two examples of services received by Dollar.  In one example it was decided that despite;

  • there being no legal relationship between the lead generator and the potential borrower
  • that the leads were sold to the lender offering the best commission
  • that the assessment for loan suitability was quick, only involved only a few basic checks, and did not require any judgment or discretion, and
  • that only 1% of the introductions resulted in offers of loans to borrowers,

the appellant was acting as more than a mere conduit or in an advertising capacity, and was providing exempt introductory services. Consequently, there was no need to apply the Reverse Charge.

In the other example, the Tribunal considered that a single supply of online chat assistance was more akin to an outsourced, principally back-office function which did not amount to intermediary services and was therefore standard rated such that Dollar must apply the Reverse Charge.

Commentary

This case demonstrates the need to identify precisely what is being provided by a business’ suppliers and to review contracts intently.  A small change in the circumstances between one supply and another may result in different VAT treatment. This is a comprehensive judgement and it is worth reading in its entirety if a business is involved in these type of transactions.  We recommend that advice is sought by those businesses which could be affected by this case; either as supplier or recipient.

VAT Distance Selling Q & As

By   11 July 2016
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VAT Distance Selling: What is it and how will it affect my business?

Q – My internet business is expanding and I am now selling goods all over the EC. Does this create any VAT issues?

A – It could do; if you are selling to individuals (or any other non-business entity) then you should be charging UK VAT regardless of where your customer belongs in the EC. However, when these type of sales reach a certain limit, you will be required to VAT register in each Member State in which the threshold is breached. These are called the Distance Selling rules and apply in situations where the seller is responsible where the supplier is responsible for the delivery of goods B2C; typically mail-order and increasingly goods purchased online (so called “delivered goods”).

Q – What are those limits?

A – Each Members state sets its own limit. However these may be broken down into two categories:

€ 35,000 (or near equivalent in domestic currency) Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Greece, Hungary, Ireland, Latvia, Lithuania, Malta, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Italy.

€ 100,000 (or near equivalent in domestic currency) Austria, Germany, Luxembourg, Netherlands, UK.

Q – What are the practical implications?

A – Each Member State has different rules for VAT registration and filing of returns. All dealings, save for a few Member States, are undertaken in the language of that country, so broadly, there could be 27 sets of rules and many languages to master in order to comply with the Distance Selling rules! Additionally, we find that some business are unaware of these rules, or discover the impact of them after the limits have been reached. This creates penalties for late registration and filing in nearly all Member States. However, mitigation (along the lines of “reasonable excuse” in the UK) in varying degrees is available in some countries. We have found that it is possible, via negotiation to have penalties reduced or removed after making full disclosure of past turnover. As one may expect, the approach varies from country to country.

Q – Do I have any choices?

A – Yes, although it is not necessary to register until the thresholds set out above are breached; it is possible to VAT register there on a voluntary basis rather than accounting for UK VAT. The considerations are usually; the VAT rate in the Member State concerned (compared to the UK) and; administrative simplification, ie; not having to change over from UK VAT to another Member State’s VAT regime when the limit is reached.

Q – But what if I have accounted for UK VAT on these sales already, what can be done about that? I don’t want to have to pay VAT twice to different authorities.

A – In our experience, HMRC do repay UK VAT overpaid if overseas output tax is due, but this sometimes becomes a struggle and HMRC require full explanation and precise evidence to support a repayment.

Q- Do these rules affect sales made to customers outside the EC?

A- No, these are usually zero rated as exports.

Q So I need to identify the location of all of my customers and monitor sales to ensure I comply with the rules and to identify whether to charge VAT, at what rate, and to which authority?

A – Yes, I am afraid so!

Please contact if you would like us to deal with overseas authorities on your behalf, or you would like assistance with technical issues or with language matters