VAT on Consultancy

[TH1]

Can anyone help with this? Imagine that an American company enters a consultancy agreement, with a UK firm, to provide consultancy in the UK via the Americo's self-employed agent/consultant. The Americo invoices the UK firm and is paid by them. The UK agent/consultant agent is paid her fee percentage by the Americo. Does the UK firm have to account for vat in any way? Hope someone knows. T

[vatexpert]

The provision of consultancy services from a USA supplier to a UK customer is treated as supplied where received, subject to an exception where the consultancy services relate to specific land or property.

This means that although no VAT is chargeable on the USA invoice, the UK recipient must account for VAT under the reverse charge procedure. In effect this means that it must declare, as output tax, VAT at the standard rate (currently 17.5%) and, if it is a fully taxable business, it can reclaim this VAT as input tax, thereby leaving it in a neutral position. This procedure is intended to discourage exempt businesses from obtaining services VAT-free from overseas.


Joe Wilkins
www.vatexpert.net

[Eamon McNicholas]

Key question is who is providing a service and where?

From what you say looks like Americo is providing consulting services in the UK though a UK branch or agency.

The fact that Americo does this by way of their UK sub-contractor is an issue for Americo not the UK customer. Americo has a business foothold in UK and so they are UK supplies.

So, presuming these to be VATable consultancy services, but check exact status, question is then the turnover and so liability of Americo to be registered for VAT. If so then Americo has to be registered and account for UK VAT.

So problem is primarily Americo's not the UK customer's.

But UK customer would be best not to part with payment which includes VAT without a proper VAT invoice from Americo.

Eamon Mc Nicholas
Tax Barrister

EamonMcNicholas.com