I have just taken on a VAT registered UK client who supplies services to VAT registered companies in various other EC member states and also to companies outside the EC. He is currently on the flat rate scheme. If supplied to a UK customer, his services would be standard rated.
Questions:
1) Does the value of all supplies need to be included in the FRS calculation?
2) Are his supplies to other EC member states zero-rated or outside the scope of VAT?
3) Does he need to complete EC sales lists?
Thanks
Replies (5)
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What are the services?
The answers to the question will depend on the type of services we are looking at. We are looking at the place of supply rules to determine whether the service is outside the scope of UK VAT or taxable. For example, services related to land in the UK will be taxed in the UK and will be within the calculation for the FRS. However, most services to a business in another EU member state will be outside the scope of UK VAT subject to the usual conditions e.g. quoting the VAT number of the customer and country ID on the invoice. Similarly most services to a customer that belongs outside the EU are outside the scope of VAT. Outside the scope supplies are not included in the FRS calcultaion.
The caveat is that there are exceptions to the general rule for services and the place of belonging of the customer has to be correctly determined.
Finally, ESLs will be required for services accounted for by the customer under the reverse charge rules, even if the client is on the FRS.
Comprehensive
The answer above is about as comprehensive as you are going to get. Place of Supply of services is my most common VAT query. Do yourself a favour and add Notice 741a to your reading list.
Input tax
You could reclaim the UK input tax because the services would be a VATable supply (standard or zero-rate) if made in the UK, provided you were operating the normal VAT scheme. However, this does not apply under FRS which is based solely on the value of outputs - you are not allowed to claim any input tax, apart from capital expenditure.