VAT Implications

Scandinavian Region

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Good Afternoon

My client who is a UK established business Company (A) is going to sign a new contract outside UK. Situation is that my client Company (A) receives $5000 direct from patient or patient's insurance company. UK Company pays $3000 to US company (B) for providing the test and $1000 to Company (C) for their promotional services.

Company A who is registered for flate rate must charge reverse VAT to Company C

Company A pays Company B - B2B NO VAT

Does the UK company need to mention on VAT invoice words like - monies received on behalf of Company B (just like travel agents)

What difference will it make if patients pay direct to US Company and my client receives $2000 instead? I think its irrelevant BUT would like to see your feedback.

Thanks for your help.

Replies (2)

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By spidersong
07th Feb 2017 15:07

Why is 'A' charging reverse VAT to 'C'? Do you mean A declares reverse charge in relation to the payment made to company C? Is 'C' the new party in the contract you mention, or is it customers in Scandinavia they're gaining?

I take it we assume that company C is not a UK company, and do we assume that all of Company A's supplies are standard rated?

Anyway at the moment your client is paying x% of £5000 income and charging and recovering £200 of reverse charge.

If the clients contracted direct with the US he'd just receive £2000 on which to account for x%.

So lets say for arguments sake since you've given no indication a 10% FR:
£5000 received, FRS £500 to HMRC, £4000 to suppliers, retained income £500.

£2000 received, FRS £200 to HMRC, £1000 to supplier, retained income £800.

Or at the moment is company A treating the test as a disbursement and not including it in their turnover in which case it wouldn't make a difference, but are they actually entitled to do that? It's kind of hard to tell without actually knowing where all the parties are, what service A is actually providing, and how they're treating things at the moment!

So that's a definite maybe.

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Replying to spidersong:
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By ArsalanShah
07th Feb 2017 16:27

Hi

Thank you for your response.

Company C is based in Scandinavian region providing promotional services to Company A. Therefore, Company A must charge reverse VAT as if it would have hired a business in the UK to do this work, the cost would have been standard-rated for VAT at 20%.

Sorry this information was omitted in original post - Company A is registered for 7.5% (discounted rate for being in their first year of trading)

As I understand you have also asked about contract situation between three companies in question.I have tried to explain it in a better way:

Company B is contracting with Company A who introduces patients to Company B and Company A gets a fee of $3000 for every lead.

On the other hand, Company A has hired Company C for promotional activities.

Thank you.

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