Reverse Charge

[amitr19]

Hi

Am i correct to assume that if my customer is in the EU (B2B transaction) but not registered for VAT in their country then I will have to charge UK VAT and cannot reverse charge.

How will they be able to claim the VAT then?

[pjclar02]

Hello there

Yes - you are correct that you will need to charge VAT if your customer is not VAT registered in their home state. I think the point is that they cannot reclaim the VAT you charge them - because they are not VAT registered. Just as a UK business could not recover the VAT you charge them unless they are VAT registered.

Hope this helps.
Best wishes

Paul

[Generix]

Hello there

Yes - you are correct that you will need to charge VAT if your customer is not VAT registered in their home state. I think the point is that they cannot reclaim the VAT you charge them - because they are not VAT registered. Just as a UK business could not recover the VAT you charge them unless they are VAT registered.

Hope this helps.
Best wishes

Paul

No totally wrong.

If the customer is in business and you are providing them with services, then providing you have some evidence they are in business then you can treat the supply as outside the scope of UK VAT.

Note that if you are talking about goods, a different ruleset applies, and you will need to charge UK VAT, or possibly foreign VAT depending on the value of the supply.

[pjclar02]

Hello Generix

I may have to bow to your superior VAT knowledge here (!!)....however I have found the following on the HMRC website which seems to confirm my advice - do you think this may be out-of-date?

How do you charge VAT to someone in another EU country?
If you sell goods or services to someone who isn't VAT registered in another EU country, you must charge VAT in the normal way - just as you would for a UK customer.
Find out how to account for VAT when you invoice in another currency
You include the sale in your VAT Return for the period when the tax point takes place. This is just the same as for sales to UK customers.

Many thanks for confirming

Best wishes

Paul

[Generix]

Hello Generix

I may have to bow to your superior VAT knowledge here (!!)....however I have found the following on the HMRC website which seems to confirm my advice - do you think this may be out-of-date?

How do you charge VAT to someone in another EU country?
If you sell goods or services to someone who isn't VAT registered in another EU country, you must charge VAT in the normal way - just as you would for a UK customer.
Find out how to account for VAT when you invoice in another currency
You include the sale in your VAT Return for the period when the tax point takes place. This is just the same as for sales to UK customers.

Many thanks for confirming

Best wishes

Paul

Can't believe they put this sort of stuff on their website, no wonder people get so confused!!!! Don't think that has ever been 'in-date' except maybe before the introduction of the reverse charge/single market.

Maybe it is just out of context, have you got a link to that particular page?

If anyone wants certainty I can provide the legal references? (think I have done in another post a long time ago already) - or maybe someone else can confirm I'm right?

[pjclar02]

Thanks Generix

Link to the HMRC page......http://www.hmrc.gov.uk/vat/managing/international/exports/goods.htm

[Generix]

Thanks Generix

Link to the HMRC page......http://www.hmrc.gov.uk/vat/managing/international/exports/goods.htm

Ahhh it's out of context there, although the wording is still very misleading when referring to 'services'...for goods it reads correct though, and that covers the little known distance sales issue which I'm always banging on about.

Here is a better link for services.

See in particular s2.5 and 2.7 which explains the 'b2b' in context of place of supply rules, (i.e. b2b doesn't have to mean VATreg2VATreg)

Hope this helps.

[Generix]

Lol....

here's the link

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_PROD1_029955&propertyType=document#P96_9790

[Kitty Kat]

Lol....

here's the link

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_PROD1_029955&propertyType=document#P96_9790

So just to put it in simple (Kitty) terms, the VAT status of a trader is only relevant from a goods perpective (deciding whether to ZR if applicable), it has no bearing on the provision of overseas services?

Despite it clearly saying it in my text book 'business' I read it as 'VAT registered business'

[Generix]

Lol....

here's the link

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_PROD1_029955&propertyType=document#P96_9790

So just to put it in simple (Kitty) terms, the VAT status of a trader is only relevant from a goods perpective (deciding whether to ZR if applicable), it has no bearing on the provision of overseas services?

Despite it clearly saying it in my text book 'business' I read it as 'VAT registered business'

I think the wording in the EU legislation, 'taxable person', makes it confusing for non VAT experts, as I guess you would expect a 'taxable person' to be a 'VAT registered person'...however if you read Art 10 of the EU VAT directive then it is clear this is not the case.

And if your question was a question and not a statement then, for the avoidance of doubt, yes, you are correct

I would caveat that you do STILL need to check (a) whether your EC customers are VAT registered (for ECSL purposes) and (b) that they are within the definition of a taxable person within Art 10.