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UK Company supplying services to a contractor in the Republic of Ireland

A UK contractor will be invoicing most of his income to a RoI company (supplies not goods) with expected annual turnover of between £70K-£80K (with say another £5K UK based turnover)

My understanding is that the "B2B" rules state that for UK VAT, the RoI supplies are outside the scope of UK VAT so no need to register here regardless of the level of turnover. However, a quick look at the RoI VAT website suggests the client will need to register for VAT in the RoI as a "foreign trader"

Would appreciate any pointers for anyone who's had experience on this kind of arrangement as to whether this is correct, and any referrals for RoI contacts who I can direct the client to if needed.

Thanks in advance

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Reverse charge

Does the R/C not apply in Eire?

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My understanding is that the place of supply rules (for supply of services rather than goods) mean the supply is deemed to take place in RoI so outside the scope of UK VAT, and no R/C to consider.

(Unless I misunderstood your point?)

 

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I think you did misunderstand my point

With a B2B supply, if the place of supply is where the recipient belongs (which it usually will be) then it is the recipient that accounts for VAT under the reverse charge mechanism, assuming that the recipient's country operates R/C (which most EU countries do, as far as I am aware).

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Thank you, I see ..... I think

So, to summarise ......

- if the UK sub-contractor was to choose to become VAT registered here, then he wouldn't need to charge UK VAT in any case, as it would be dealt with under the R/C provisions.

- if the UK sub-contractor chooses not to register for VAT here (which wouldn't be required as that part of his turnover is outside the scope of UK VAT), then it comes down to the RoI requirements for a non-resident trader.

 

 

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What it comes down to ..

... is whether the R/C operates in Eire. If it does, the recipient should account for VAT and there should be no question of registration in Eire. UK registration status is irrelevant.

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Yes, but ...

I agree with BKD, but sometimes it seems to be necessary for the supplier to be registered for VAT in the UK so that the foreign customer can operate the reverse charge in his own country.

We have a client with UK sales of about £10,000, but B2B sales of services to Portugal of £250,000.  They were nowhere near the UK registration limit on taxable supplies (and had almost no expenditure on which they could reclaim input VAT), so they did not need to register for UK VAT, but the Portuguese customers were apparently unable to operate the reverse charge without proving that the UK supplier was in business, as evidenced by a VAT registration.  I feel that this must be a misinterpretation of the EC rules - either on the part of the customers or of the Portuguese fiscal authorities - but in practice, our client had to register for UK VAT.

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Correct (and thanks), Euan

That point had crossed my mind, and my closing sentence above ought to have read "UK registration status should be irrelevant."

I need to stress also that my knowledge of Irish VAT is scant at best. In the UK it used to be the case that a non-UK supplier carrying out construction work in the UK for a UK-registered customer could choose either to have the reverse charge operated or to register in the UK (the latter option being relevant if he were incurring significant UK input VAT). However, it seems that the choice is no longer there if the supplier's only customers in the UK are VAT-registered and able to operate the reverse charge. As to what the position is in Eire, I really don't know - I am aware that they do operate the reverse charge, but also that they have some pretty specific rules regarding construction operations.

The OP's best bet would be to contact a tax adviser in Eire. Or to speak to TMF - I have found them to be particularly helpful with oversesas VAT issues.

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Eire experience

I had a case a year or so ago as follows..

1. UK supplier

2. Eire customer

3. B2B supply

4. Land-related services carried out in Eire

So based on above points 3 and 4 outside scope of UK VAT.

Looked to me like UK supplier might have a liability to register for VAT in Eire.

Took advice from a firm of VAT advisors in Eire who confirmed that my client, UK supplier had to register for Eire VAT as activity / supplies taking place in Eire.   My client not eligible to seek NOT registering for VAT on grounds of being below Eire registration VAT limit - no VAT reg'n limit for non-established traders.

 

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Place of supply

I believe Ireland, like the UK now, has a zero-threshold for non-established persons making supplies in Ireland, as DMGbus has said.  So the question is, do the supplies take place in Ireland?  If they are intellectual services they will of course, but a RC will apply I think, and no registration needed.  If they are land related services, then Ireland may apply the same rules as the UK, for B2B (to a registered customer), the customer can reverse charge.

Just on a general level, the VAT registration status of the supplier has nothing to do with the reverse charge liability on the buyer.  If he is buying from a business, he must apply a reverse charge, though some countries have particular requirements on the recipient which may complicate matters.  Part of the problem is that the rest of the UK has next to nil or nil threshold, whereas the UK threshold is really high. Oh and of course the EU don't believe in non taxation at all, so it is always going to be complex when this occurs!

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Thanks everyone .....

It's been educational, not something I've dealt with on a day to day basis before.

One thing I'm still slightly confused about from some of the comments is the application of the reverse charge by the recipient of the supply of services (ie. in Ireland for this scenario) where the (UK) supplier isn't VAT registered.

I was under the impression that R/C is only relevant where the supplier is VAT registered in the the home country (ie. here in the UK for this scenario). So, if the client didn't register here under UK VAT and didn't therefore need to consider VAT when invoicing his contractor, I didn't know this still gave rise to a R/C for the recipient.

So, to look at it another way. If a UK (VAT registered) customer receives services from an EC supplier who isn't VAT registered in their home country, the UK customer still needs to apply a R/C on the supply regardless - even though there's no VAT number. Is this correct?

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Correct

Provided the supplier is in business. As has been mentioned above, some seem to think that VAT registration is the only indicator of a business, which clearly isn't the case.

I would certainly defer to the expertise of the Irish VAT advisers in DMGBus's example above, but that treatment does appear to differ from that in the UK. What it seems to mean is that whereas non-UK traders once had the choice to register in the UK where land-related services were carried on, in Eire it is compulsory.

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