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Reverse charge for VAT

I have a client newly registered for VAT who will be supplying consultancy services mainly to a company in Southern Ireland and therefore falls under the new place of supply rules.

I have ascertained from the VAT helpline that the VAT will be accounted for under the reverse charge principals with the place of supply being deemed to be that of the customer and with them being required to account for the VAT.  They have not been overly clear as to what my client actually needs to show on his invoice when issued though.

My previous understanding of the reverse charge system was that he needed to show VAT on the invoice but state it as "zero rated under reverse charge" and that he was also required to show the customer's VAT number as well as his own.  The VAT Office helpline have advised me, however, that he should not show any VAT at all and that he needs to retain the customer's VAT number but didn't seem to be able to answer whether he needs to show this on the invoice or not.

The customer will also be paying for any expenses such as travel in addition to the cost of the services but I couldn't get any clarification on whether these should be shown differently or the net amount listed on the invoice only.

They also advised me that he will not need to complete an EC sales list unless he is importing services himself or unless goods are involved but the requirement for the EC sales list falls on his customer.  This seems to be different to how it reads on the HMRC website so which one is right?

Any help in clarifying exactly what needs to be shown etc will be greatly appreciated.

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06th Aug 2010 16:21

Invoicing requirements not clear

I don't think there is any specific legislation that lays down exactly what has to be shown on such invoices.  If the place of supply is where the customer belongs elsewhere in the EU, then the supply is outside the scope of UK VAT (not zero rated). However I believe HMRC will want to see the customer's VAT number on the invoice as evidence that the reverse charge applies. It would also be sensible to add some narrative along the lines of "no UK VAT - reverse charge applicable" or similar.

 The supplier will need to complete and submit an EC sales List for all supplies of services into the EU that are subject to reverse charge by EU VAT-registered customers.  This is a new requirement from 1/1/2010 and mirrors the rules for supplies of goods into the EU.  The VAT Helpline advice seems to have become horribly garbled; as described in KTS' post, it would be just plain wrong.  The correct position is quite clear in HMRC's own publications.  You can find plenty of advice if you go onto HMRC's website and do a search under EC Sales Lists.

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26th Aug 2010 12:15

Invoice details

The invoices raised by your client to the Irish customers should NOT include any VAT amounts, so in essence the gross and net amounts will be one and the same - the invoices should also state the customer's Irish VAT registration number

At this side of the pond, the Irish customer will be required to calculate Irish VAT at either 13.5% or 21% depending on the nature of the goods/service being received - they will be required to pay this over to the Irish Revenue Commissioners - they can then offset this sum against any output VAT they include in their next VAT Return

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By DMGbus
27th Aug 2010 13:29

Specific wording on the invoice

Here's something that might be worth looking at more closely:-

" Company selling professional services to customer in the Netherlands for £15,000. Customer VAT number and country prefix shown on invoice, but legend as to the nature of the transaction (for example “Article 44 EC Directive 2006/112 Reverse charge”) has been omitted. VAT liability £2234. Penalty liability £670 (30% penalty; careless, unprompted). "

The above is from an eMail circular received a company in Birmingham, Covertax who specifically advise on VAT matters.

Their website is at:-

http://www.covertax.co.uk/

 

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02nd Jan 2011 14:55

Business not VAT registered - ESCL

The advice I have seen and reading the HRMC website:-

If client is deemed a Business and is VAT registered:

1. Include your own VAT No. on invoice

2. Include client VAT number on invoice

3. Include statement or similar: 'Subject to reverse charge in the country of receipt'.

4. Need to complete ESCL based on your VAT return period. No need to complete NIL return.

However the confusion for me is:-

1.If client is deemed a Business but NOT VAT registered.

2. HMRC advice is:-

If a customer claims to be in business but not to be VAT registered then alternative evidence should be obtained. This can be in the form of other reasonable commercial evidence or records that should normally be available eg contracts, business letterheads, a commercial website address, publicity material, certificates from fiscal authorities, etc. A digital certificate from a reputable organisation can also be used for this purpose.

3. Advice in an article on this website:-

You should only record on an ESL supplies to businesses in other Member States that are VAT registered and can provide a valid VRN. The amended Article 264 of the VAT Directive makes it clear that the customer’s VRN must be included on the ESL. If you make a supply to a business which is not registered for VAT in their Member State because it is below the registration threshold, but which has provided you with evidence that it is in business (for place of supply purposes), you should not include these supplies on your ESL because the absence of a VAT registration number would cause it to be rejected. However, in some cases receipt of the supply will result in the business being required to register in their Member State. If this is the case and a VRN is subsequently given to you, an amendment should be made the EC Sales List at that time.

**** I find this strange if the client is NOT VAT registered because:-

1. It would appear that if this invoice does NOT take the client over their countries VAT threshold then they do not pay VAT.

2. However if the client was in the UK or the supplier was in the same member state as the client then the supplier would charge the client VAT and the client would not be able to claim back the VAT.

 VAT return

1. I'm also still not clear how a 'Reverse Charge' Invoice to a client in another member state is included in the VAT Return or is it?

Your thoughts?

Regards

SteveB

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By che
31st May 2012 16:11

VAT Returns

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08th Jan 2015 03:01

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