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Where Taxpayers and Advisers Meet

UK to EU service VAT

vatquestions
Posts: 1
Joined: Sun Aug 02, 2020 3:44 pm

UK to EU service VAT

Postby vatquestions » Sun Aug 02, 2020 6:22 pm

I registered as a sole trader with HMRC and have provided a service to a person owning a company in an EU country. Now I am struggling to issue an invoice to the company to collect the income. I have provided no other services, and have no other revenue or expenses during being a sole trader.

Per the below link regarding services from UK to EU, the recipient of the service would be responsible for paying VAT on the transaction in their country:

https://www.gov.uk/vat-businesses/vat-services-to-eu-businesses

As it falls under the general place of supply services rule as "Individually commissioned content sent in digital form" (and not a digital service):

https://www.gov.uk/guidance/the-vat-rules-if-you-supply-digital-services-to-private-consumers#define-digital

Initially I attempted to produce a b2b invoice with no VAT charge to the company, but was told that they wouldn't be able to accept an invoice due to the lack of a VAT ID.

According to this link, I do not have to register a VAT ID as a sole trader since the transaction is VAT exempt and so I do not have any VAT taxable turnover:

"You must register for VAT if your VAT taxable turnover goes over £85,000 (the ‘threshold’), or you know that it will. Your VAT taxable turnover is the total of everything sold that is not VAT exempt."

https://www.gov.uk/vat-registration/when-to-register

According to this link however, I cannot even register voluntarily as everything sold is VAT exempt:

"You can register voluntarily if your turnover is less than £85,000, unless everything you sell is exempt."

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

At this point we're unable to proceed, as I can't register for VAT, and they can't accept an invoice without VAT.

They point out that it seems crazy to attempt to issue an invoice with no VAT, and that the guidance doesn't mention any threshold. Say if this were for £1 million, would I still just send an invoice with no VAT info, containing essentially little more than a unique invoice number (1) and my address?

They suggested that we could proceed if I instead classify the transaction as b2c so that I could register for VAT, however then it would have to come from the individual's post-tax income instead, and so would have to be a lower amount. This also feels wrong, since it should really be a b2b transaction; there must be a way to do it.

Have I misunderstood HMRC guidance? Should I try to register for VAT anyway and proceed with a b2b transaction?

I've read a few other threads, but not found a definitive answer/resolution:

https://www.taxationweb.co.uk/forum/viewtopic.php?f=13&t=56867
https://freelancing.stackexchange.com/questions/9307/uk-self-employed-not-vat-payee-eu-client-wants-eu-vat-number

Many thanks in advance.

les35
Posts: 583
Joined: Wed Aug 06, 2008 3:09 pm

Re: UK to EU service VAT

Postby les35 » Mon Aug 03, 2020 8:49 am

You can register for UK VAT if all your sales are 'General Rule' services. This means you can claim all the VAT you incur as input tax. You will have to charge on any sales to UK customers too.
Your invoice will then have the relevant wording on 'Reverse Charge service,' or similar.

davebrownvat
Posts: 59
Joined: Mon Jul 20, 2009 4:37 pm

Re: UK to EU service VAT

Postby davebrownvat » Wed Aug 19, 2020 9:56 am

What you're doing is not exempt.

Trevor S
Posts: 61
Joined: Tue Jan 01, 2019 12:37 am

Re: UK to EU service VAT

Postby Trevor S » Wed Aug 19, 2020 2:31 pm

To expand on the previous post, I too can't see how your supplies are exempt. Exemption is a specific classification of supplies, listed in schedule 9 of the VAT Act. There are other classifications of "non-VATable" transaction, such as "outside the scope" and "zero rate". Being unregistered due to being below the registration limit doesn't automatically make your supplies "exempt", nor does making B2B supplies.

As Les suggests, you could register for VAT, enabling you to reclaim input tax on your related costs and issue a B2B invoice to your customer. However, just confirm that your customer is the business. At the start of your post you mention "...provided a service to a person owning a company in an EU country". That may just be your wording, but a supply to the company would be B2B, whereas a supply to a person who just happens to own a company would be B2C.


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