VAT on services in UK but invoiced to a business in the Netherlands

awwallace22

Hi.

An IT company (registered for VAT) provided services to an address within the uk, but the invoice will be made out to the company which is in the Netherlands. Is it correct to add VAT on the invoice as the services were within the uk? or should it be zero rated because the company is based in the Netherlands?

Thanks

reader

"invoice will be made out to the company which is in the Netherlands"

I think because the supplies are being made out to a business which is in the Netherlands you can zero rate this supply under the reverse charging mechanism, i.e. the Netherlands company should account for the output VAT (and input VAT) not you.

Try and get the VAT registeration number or business letter head for the Netherland company just in case there is a VAT inspection and the inspector wants proof that the Netherlands customer is a business.

Dcollins

If the supplier is in the UK, and the service is delivered to a UK address you need to follow UK VAT rules, and charge VAT as normal. The invoice address is irrelevant, it is the place of supply that matters.

awwallace22

Thanks Dcollins, I was more this way thinking re, the place of supply in uk, unfortunately my client seems to think he should zero rate cos of invoice address. Obviously he could zero if the supply of service was in the Netherlands.

Fingersan

Hi Guys

I agree with Dcollins. Under the changes to VAT in January 2010 it is more about the place of supply. I have found this, which may help:

http://www.hmrc.gov.uk/budget2009/bn74.pdf

Regards

LynWest

Hi I also agree that the Dcollins, i do some work for a company that exports products all over the world and occasionally they will sell to a company in Europe but they want the items delivered to somewhere in UK so they have to get charged VAT as the supply is in the UK. Often on an inspection HMRC will want to see shipment documents to show that the product left the country and where it went to in order to allow the zero rating, not quite the same for a service i know but the same principle applies.

reader

Looks like my knowledge of cross-border VAT is a bit weak; can I ask what would be the situation if the IT company supplied an individual (not a business) in the Netherlands with IT services; would the IT company have to charge VAT on the sale?

I ask because I don't understand the "place of supply" rules, I thought that the "place of supply" was determined by the "general rule", i.e. if the customer is a business the place of supply is where the customer belongs, and if the customer is an individual (i.e. not a business) then the place of supply is where the supplier belongs.

http://www.hmrc.gov.uk/vat/managing/international/exports/services.htm

So I'm confused; is the answer:
1) The sale would have to have output VAT on it because the customer is a non-business customer, i.e. an individual, or
2) The sale would not have output VAT on it because the supply is outside of the UK and therefore outside the scope of UK VAT

Bluewednesday

My thoughts are that the place of supply is where the services are performed which was the UK so UK VAT is chargeable.

However if where you supplied the services in the UK is not a fixed establishment for the Dutch company then I believe VAT may not be chargeable, as it will be accounted for under the reverse charge rules by the customer. It looks like it all depends on whether they provide services from the base in the UK as to whether it is termed a fixed establishment.

Willing to be corrected though, EU VAT is mad!!!

Dean

Bluewednesday wrote: »

My thoughts are that the place of supply is where the services are performed which was the UK so UK VAT is chargeable.

Agreed!

Although sometimes performance of services in the UK could still be non-vatable if "enjoyment" is outside the UK. You've got to love VAT!

Regards

Dean

Fingersan

Ok, here is a slightly more complex question to get your heads aching!!...

I have a client who is providing services to the middle east for a french company. I know that there will not be any VAT, but because the services are outside the EC, does this mean that they are outside the scope of VAT, which also means that he can earn over £73,000 without having to register?

I would greatly appreciate your thoughts on this.

Thanks guys.

Bluewednesday

Yes, outside the scope so doesn't count towards the VAT limit.

http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1081183723&r.l1=1073858808&r.l2=1083126673&r.l3=1083126677&r.l4=1081167393&r.s=sc&type=RESOURCES

I hope that helps

Fingersan

Thanks Bluewednesday. That is a great help and you confirmed what I was thinking