Supplying Services To The EU

05/02/2005, by Mark McLaughlin CTA (Fellow) ATT TEP, Tax Articles - VAT & Excise Duties

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VAT Voice by Steve Allen

So you are supplying services to the EU. Could you be in for a nasty shock and find that you should have registered for VAT elsewhere in the EU?

Example

White Limited organises conferences for companies and groups throughout the UK. They have been so successful that they have won a contract with a European wide business based in the UK. This year they have been asked to organise the annual sales conference for them in Amsterdam. The contract is with the customer’s UK headquarters, and White Limited invoices them plus UK VAT.

Shortly after this, Customs pay them a visit and queries the VAT treatment. They inform White Limited that, in VAT-speak, the place of supply of conference facilities is where the conference takes place, i.e. The Netherlands. Customs go away and informs the Dutch authorities, which, in turn, contact White Limited and inform them that they should have registered for VAT in The Netherlands and can they please have the VAT due plus penalties and interest.

White Limited now has the costs and admin burden of registering for VAT in The Netherlands, issuing a credit note to the customer for the UK VAT, and then a new invoice for Dutch VAT, which is at a higher rate than in the UK. The customer then has to wait six months to claim the VAT back through the EU 8th Directive.

This may seem to be an isolated example, but it is not. This happens to thousands of businesses every year.

Typical business services

Here are a few examples of other business activities that can result in you having to register for VAT in other countries of the EU.

• Cultural, artistic, sporting, scientific, educational, or entertainment services. These include performances by musicians, training courses, sports fixtures, fairground rides etc.

• Services relating to exhibitions, conferences or meetings.

• Freight transport services provide to unregistered customers.

• Any services relating to land, for example building and construction services, the supply of plant and machinery together with operators, estate agents, legal services relating to conveyancing etc.

Most other types of services are “zero-rated” from the UK when supplied to another business in the EU. If you supplying services not shown above to private individuals in other EU countries you charge them UK VAT.

Warning

Customs communicate with their colleagues in Europe, so when they come to visit and suspect that you should be registered for VAT in another country, they will inform the relevant authority which will contact you directly. If you ignore them, UK Customs have authority to collect any outstanding tax and penalties on their behalf.

WarningRegistering overseas is not as easy as it is made out. It can be very difficult to get through to the appropriate authorities, and they often don’t speak English. It can be easier to get your tax adviser or a specialist in the other country to handle the registration for you. You can find these on the Internet.

Tip 1

From 1 January 2002, you are no longer required to appoint a fiscal representative in any of the EU member states. This can reduce your compliance costs quite significantly.

Tip 2

If you are only doing one-off or isolated business activities overseas, the authorities are unlikely to find out about them. In the end you have to weigh up the savings of not informing the authorities against the chances of being found out and having all the compliance costs, plus possible penalties, and of course, annoying your client by asking them for the VAT sometime later.

Tip 3

If you are going to carry on these types of business activities overseas, consider the VAT implication early on. It can take a while to register for VAT so you don’t want to be waiting for your VAT number when it comes time to invoice.

Steve Allen
Director, VAT Solutions (UK) Ltd
Email: steveallen@vatsolutions-uk.com

VAT Solutions (UK) Ltd
11 Winmarleigh Street,
Warrington,
WA1 1NB

(T) 01925 242497
(F) 01925 242498
(M) 07810 433927
(W) www.vatsolutions-uk.com

VAT Solutions (UK) Limited is an established independent firm of Chartered Tax Advisers, formed by Andrew Needham and Steve Allen. The company has a cross-section of clients from multi-national companies through to medium-sized and numerous smaller regional firms of accountants and solicitors. They produce a regular publication 'VAT Voice', which can be downloaded directly from the Internet via the following address: www.vatsolutions-uk.com/newsletter.doc

About The Author

Mark McLaughlin is a Fellow of the Chartered Institute of Taxation, a Fellow of the Association of Taxation Technicians, and a member of the Society of Trust and Estate Practitioners. From January 1998 until December 2018, Mark was a consultant in his own tax practice, Mark McLaughlin Associates, which provided tax consultancy and support services to professional firms throughout the UK.

He is a member of the Chartered Institute of Taxation’s Capital Gains Tax & Investment Income and Succession Taxes Sub-Committees.

Mark is editor and a co-author of HMRC Investigations Handbook (Bloomsbury Professional).

Mark is Chief Contributor to McLaughlin’s Tax Case Review, a monthly journal published by Tax Insider.

Mark is the Editor of the Core Tax Annuals (Bloomsbury Professional), and is a co-author of the ‘Inheritance Tax’ Annuals (Bloomsbury Professional).

Mark is Editor and a co-author of ‘Tax Planning’ (Bloomsbury Professional).

He is a co-author of ‘Ray & McLaughlin’s Practical IHT Planning’ (Bloomsbury Professional)

Mark is a Consultant Editor with Bloomsbury Professional, and co-author of ‘Incorporating and Disincorporating a Business’.

Mark has also written numerous articles for professional publications, including ‘Taxation’, ‘Tax Adviser’, ‘Tolley’s Practical Tax Newsletter’ and ‘Tax Journal’.

Mark is a Director of Tax Insider, and Editor of Tax Insider, Property Tax Insider and Business Tax Insider, which are monthly publications aimed at providing tax tips and tax saving ideas for taxpayers and professional advisers. He is also Editor of Tax Insider Professional, a monthly publication for professional practitioners.

Mark is also a tax lecturer, and has featured in online tax lectures for Tolley Seminars Online.

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