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Where Taxpayers and Advisers Meet

VAT/MTD threshold, when much turnover non-UK/EU

Oldtramp
Posts: 16
Joined: Sun Mar 26, 2017 7:20 pm

VAT/MTD threshold, when much turnover non-UK/EU

Postby Oldtramp » Tue Feb 26, 2019 1:32 am

I have consultancy / lecture fee turnover which, over the past several years has averaged £65000 p.a., all presently as a sole trader. Around 40% arises from UK clients for work in the UK; 20% from EU clients and 40% from rest of the world (RoW..... USA, mid E and India). Clients are large and small pharmaceutical Cos and medical agencies: all is B2B not B2C. Work for overseas clients is mostly undertaken overseas, though some is for a retained consultancy with regular payments.

Several years ago (2011) HMRC sent me a ‘nice’ letter (presumably predicated on the turnover figures from my SA return) insinuating that, in some 12-month period(s), my turnover might have exceeded the then VAT registration limit and asking me to ‘consider carefully’ whether I should be VAT registered. I responded by writing to explain how much of my turnover arose from overseas and citing their website, which then said:

http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm#4

“You supply goods or services from the UK to other countries
You don't need to include [in taxable turnover] supplies you make in other countries when calculating your VAT taxable turnover for registration purposes - so leave out of your calculation any goods and services you supply where the place of supply is another country rather than the UK.

They phoned 2 days later and agreed that I didn’t need to be registered.

For several subsequent years my fee income was flat, whilst the VAT registration limit crept upwards, meaning that the potential issue diminished. I nonetheless took the precaution of writing, on my SA return, words to the effect “X% of this year’s turnover arises from overseas and therefore does not count to taxable turnover w.r. to potential need for VAT registration.”

Now, coming to the end of 18/19, I find that I’m having a good year and am at risk of crossing the present threshold of £85000, for at least 2-3 consecutive 12-month periods around March to May, still with the rough 40:20:40 UK:EU:RoW split. I don’t expect this peak to be maintained long term, nor to rise further.

HMRC’s website’s wording seems to have changed slightly, and we now have:

https://www.gov.uk/vat-registration/calculate-turnover

…. exclude VAT-exempt sales, and goods or services you supply outside of the UK.

Elsewhere - and perhaps only if you are VAT registered already - they seem to distinguish between turnover arising in the EU vs RoW but (a) even counting EU turnover in with UK I'm still below the threshold be a comfortable margin and (b) we're supposed to be leaving the EU on 29/3. So I remain confident that I don't need to register for VAT even with total turnover touching (say) £90-95000 so long as the RoW component sticks at c. 40%, as it will.

However, HMRC’s guidance on the need or otherwise to register for MTD is nothing like so clear. Am I supposed to register if my turnover briefly tops £85000 p.a., even though I’m not over the taxable turnover threshold for VAT itself. The only item I can find that is clearly written is in:

https://www.icpa.org.uk/portal/vat/what_is_turnover_for_mtd_for_vat_purposes

Saying that “Taxable turnover for MTD is the same as taxable turnover for VAT registration purposes” and that “The following supplies are not included in taxable turnover:………. Supplies of services where, under the place of supply rules, the place of supply is outside the UK; these supplies are outside the scope of UK VAT”.

If this is correct, then I’m still in the clear, with no need to sign up for MTD. But I’d be more reassured if I could see this as explicitly on HMRC’s website.

Any views/pointers?

robbob
Posts: 2879
Joined: Wed Aug 06, 2008 4:01 pm

Re: VAT/MTD threshold, when much turnover non-UK/EU

Postby robbob » Tue Feb 26, 2019 9:38 am

I can't think of any major changes off the top of my head - presuming its always the general B2B rule for services that applies for you (or if goods they are always exported outside the uk.)

To me
You don't need to include [in taxable turnover] supplies you make in other countries when calculating your VAT taxable turnover for registration purposes
is reasonably consistent with the following
exclude VAT-exempt sales, and goods or services you supply outside of the UK.
Even if the work is performed in the UK general B2B normally dictates place of supply for services is where customer is based so outside the uk for the purposes of this test.

You should be fine with MTD following the sames rules as vat registration rules wit regard to turnover calc.
Elsewhere - and perhaps only if you are VAT registered already - they seem to distinguish between turnover arising in the EU vs RoW but (a) even counting EU turnover in with UK
Can you give an example - there is always the exception to the rule in that the general rule does not apply to everything and that's the difficulty ensuring that you know the gernal rule applies with 100% certainty.

If in doubt i would always recommend writing to vat office for clarification.


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