VAT registration for 100% non UK sales?

[Noz]

As I approach the 12 month turnover VAT registration threshold, I cannot find a clear answer on the HMRC website as to whether I need to register and start charging VAT. I am self employed and UK based running a website which markets property for overseas estate agents and developers. My income is derived from commission sharing on successful sales from leads supplied to agents via my site. I invoice non UK companies and am paid from foreign bank accounts in euros direct to my UK bank account. I have little VAT to reclaim so it is not in my interests to register and charge my clients VAT if I can help it.

I am told by industry colleagues generally (but not specifically) that this type of service and/or the geographical location of my clients means that no VAT is chargeable. The HMRC website seems to rely on "place of supply" which would seem to mean my location not that of my customer and would therefore hint that I should be charging VAT. But there seems to be exceptions for things like property related services and advertising services (inc websites), either of which may cover me.

I notice that Google do not charge VAT for their Adwords service (Ireland based) and allow customers to self assess. Is this maybe a method used to prevent buyers from having to reclaim VAT from another country and I am therefore correct in not charging VAT to my overseas clients?

Any advice appreciated.

Noz

[Brian Clarke]

The agents you supply your service to - are they themselves located in the EU and are they VAT registered?

Brian
bc[at]BrianClarke[dot]com

[Noz]

Hi Brian

Thanks for the reply.

The Spanish based companies I deal with are registered for Spanish VAT (IVA) but I'm unsure as to whether they have an EU VAT reg. no ( or if that matters).

I also deal with a private ltd company in Morocco (an SARL) who have charge VAT on their new property sales so I presume are VAT registered.

Noz

[Brian Clarke]

The general rule is that services are supplied where the supplier belongs - in your case the UK, and VAT is therefore chargeable. However, there is a list of exceptions to the rule, one of which is advertising. Assuming you fall within that exception, then:

Spanish based companies:
If they are VAT registered, they must have registration numbers, and you must get them. Then quote the appropriate VAT number on the invoice and zero-rate the supply.

Morocco companies:
They are outside the EU, so the VAT number makes no difference, and you can treat the supply as outside the scope of VAT.

In both cases, the fact that the companies are receiving the service from you in the course of their businesses is crucial.

Brian
bctax[at]BrianClarke[dot]com

[Noz]

Thanks Brian. The companies are receiving the service in the course of their businesses. 2 last questions then assuming I fall within the exception re advertising.

1) VAT registration - do I need to register to bill 0% VAT and if so, is this still the case if my EU sales alone won't breach the annual VAT threshold? Total worldwide sales will exceed £64k before too long on a rolling 12 month basis.

2) If the answer to 1) is no, do I still have to show 0% VAT on my EU invoices or do I just ignore?

Noz

[Brian Clarke]

1) You can't bill VAT (even at 0%) if you're not registered. It sounds like the Moroccan sales fall outside the scope of VAT, which means that you don't include them in your rolling 12 month total of turnover.

2) When you're registered, you have to show the VAT separately, in practice even if it's 0%. Besides, it makes clear to your customer how you're treating the sale for VAT purposes.

Brian
bctax[at]BrianClarke[dot]com

[Noz]

Many thanks for taking the time to reply Brian. Things are a lot clearer now and I just need to confirm my inclusion in the exception for advertising services. Cheers.

Noz

[vatexpert]

Noz. I'm sorry to have to put a dampener on proceedings, but it seems to me that you are acting as an estate agent in relation to overseas property. Consequently, you are making a land-related supply. This means that the place of supply is not where you belong or where your client belongs but where the land is situated. The rules governing the place of supply of advertising services are overridden when the advertising relates to land or property.

This means that when you make a charge for advertising a property in Spain you are making a supply in Spain and are liable to register there and account for VAT (IVA) on the fees received from the Spanish developer/agent.

The good news is that when providing land-related supplies in other countries you are not making supplies in the UK and the fees received do not count towards your VAT registration threshold.

In the UK, we operate a simplification which allows overseas businesses making supplies to UK VAT registered businesses to avoid the need to register here. The UK recipient can itself account for VAT on the supply from the foreign
provider. This type of simplification is available to each EU member state. However, I do not know whether Spain has elected to operates an equivalent simplification.

Joe Wilkins
www.vatexpert.net

[Noz]

Hi Joe. Thanks for your input. I am undoubtedly advertising overseas property but this is all I do in that respect. I am simply a lead generator and take no part in selling or any other estate agent type services. Does this make any difference to your conclusion in that I might not be providing estate agent services (as referred to in notice 741) or does this still make it a land related service which overrides the advertising element?

Noz

[vatexpert]

I believe the question, Noz, is whether your services are directly related to land or only generally related. If you advertise specific properties, then I think your service is directly related. Contrast this, for example, with a situation in which you advise on the housing market in a particular area. The latter would not be land-related. Customs state in their internal guidance

"Article 5(c)(VAT (Place of Supply of Services) Order 1992) covers the services of professionals such as estate agents, auctioneers, architects, surveyors and engineers, in so far as they are directly related to a specific site (or sites) of land. It does not apply where such services are only indirectly related to land, or where the land related service is only an incidental component of a more comprehensive service."

I would add that interpretation of the place of supply rules is a subjective exercise to a large extent as there is little detail in the legislation. Where there is an overlap, as in this case, it is often worthwhile seeking a ruling from Customs. They may consider your services to be predominantly advertising, with the land aspect being incidental. If they do, you might find it beneficial to register for VAT voluntarily, since this would allow you to recover the VAT incurred in the UK whilst not paying output tax on the commission received.

Joe Wilkins
www.vatexpert.net