VAT and USA

[UKcoach]

Hi everyone

I've read lots of the online advice both here and on HMRC, other sites etc, and can't find this specific example, so hoping someone might be able to help.

I'm an experienced leadership coach, and these days I do most of my coaching via Skype/phone.

I have been asked to do some work as a contractor to a US based coaching company A - all of it is by phone. Their only office is in the States - no offices anywhere else.

They have a major client B, who are also headquartered in the US. Their contract is for coaching services for Company B's global leadership population, who are all round the world. The contract is US based, subject to US law, and all the payments from Company B come from their HQ in the States to coaching company A in the States. Company A would then pay me, in dollars.

The question is that thorny subject, Place of Supply.

My coachees would be in the UK, other parts of Europe and outside Europe. I'm assuming at present that because my direct client A is in the US, and their contracting client B is also in the US, that I don't need to charge VAT (in fact there's no mechanism in the contract to do that anyway at present). Is that correct?

The alternative is a nightmare, because either:
My client has to pay me the VAT, but they can't reclaim it from their client, so they won't, or
My client has to setup offices in each EU country so they can invoice the local office of their client, who then have to cross charge HQ for the basic cost. So they wouldn't do this because it's a ridiculous overhead on the project..

BTW, in scale we're only talking under $30k for me.

Thanks Alan

[Trevor S]

I'm assuming that you are only contacted to company A, and that there is no direct contractual relationship between you and company B. If so, my view is that you only need to consider your transaction with A - whom A chooses to make onward supplies to us their issue. Its only due to the nature of the specific services you provide that you're even aware of company B. If instead your service was the writing of training programmes for company A, you wouldn't know who they were supplying them on to.

If so, I think that you're making a B2B supply of services, which doesn't seem to fall within any of the exceptions to the general rules, so the place of supply is where your customer is based - i.e. the US. Unfortunately I don't have any knowledge of US tax law, so don't know if the transaction would be liable to any US taxation.

As for the UK/EU VAT position of the supply by company A to company B, that needs to be for company A to resolve! However, it wouldn't be affected by the fact that you aren't US based, so if company B are regular clients of theirs, they will already have formed their view.

[UKcoach]

Thanks Trevor - that's a useful perspective.

You are correct that I am only contracted to Company A - there is no direct contractual relationship between me and Company B.

I don't know how long those two companies have been working internationally, so no idea if they have even considered this but, as you say, that's their task