What is the VAT position?

Non Vat regd client imports log cabin

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Non Vat Regd client (marketing consultant t/o £18,000) wants to import a log cabin from Czech Republic to start holiday let business in garden. Expected turnover £15-20,000 pa.

Has been told by Czech supplier that no VAT will be charged as this is a new business. Is this right?

If correct, will VAT then be charged on import. If so, assume non reclaimable as not VAT reg'd.

Despite the high cost of the cabin, £16,000, there will be little additional VAT paid out in the running of this business, so no point in making a voluntary registration?

Any comments/advice welcome as I know little about VAT and do not work with it usually (colleague who does has gone on much desreved 2 week break - well it is Feb!)

 

Replies (33)

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By Ruddles
27th Feb 2017 16:05

I may be wrong, but my understanding is that there should be no UK VAT chargeable. Czech VAT would normally be charged instead, but I assume that their reference to a new business is a reference to the fact the supplier isn't yet required to be registered.

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paddle steamer
By DJKL
27th Feb 2017 16:26

Wonder if supplier also builds the cabin in the UK or is it merely a pile of logs lifted off a lorry with a crane?

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By Jackie0802
27th Feb 2017 16:30

Am I misunderstanding the reverse charge rule? As the UK customer is not registered for VAT shouldn't the Czech be applying Czech standard rate vat?

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By Ruddles
27th Feb 2017 16:49

Is that not what I said above?

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By Jackie0802
27th Feb 2017 16:54

Not really. Not sure how the buyers requirement to be registered for vat or not impacts on on the sellers obligations to charge it.

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By Ruddles
27th Feb 2017 17:00

Do you understand the difference between "buyer" and "supplier"?

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By Jackie0802
27th Feb 2017 18:31

I'm sorry that you felt so affronted by what you see as me agreeing with and then duplicating your point that you felt it necessary to come back in an obnoxious and insulting way. Perhaps today was not a good day for you.

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By Ruddles
27th Feb 2017 18:56

Today has been a fine day - idiotic posts always make me laugh.

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By Jackie0802
27th Feb 2017 19:14

You sure you're not my ex-husband?

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By Ruddles
27th Feb 2017 19:23

Not unless I've had drastic surgery.

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By SteveRA
27th Feb 2017 16:55

I thought the reverse charge only applied to VAT registered businesses, this client has no intention of registering. I am convinced he just has to pay the VAT, end of, but have been thrown by the Czech supplier saying he will not charge VAT 'as it is a new business'. Client is totally clueless and might have given the impression he would be registering for VAT in due course.

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By Ruddles
27th Feb 2017 17:02

SteveRA wrote:
I am convinced he just has to pay the VAT

What VAT?

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By SteveRA
27th Feb 2017 18:01

VAT charged at point of import by HMRC?

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By Ruddles
27th Feb 2017 18:05

What import?

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By Dick Stastey
27th Feb 2017 18:01

Just get the client to agree a VAT-inclusive price with the Czech supplier (who has all the problems). If they have agreed a VAT-inclusive price they cannot come back later, when they have realised there as yet undetermined [***]-up.

In that respect, who's responsible for the erection?

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By SteveRA
27th Feb 2017 18:35

Thanks everyone, it certainly does look a mess, assume the [***] up to be as Portia says, with the supplier. Assume you are indeed Portia but incorrect use of 'there' leaves me unsure :)
Thank you Jackie for your helpful response, so sorry you were abused on my behalf, I do appreciate your replies. We are all a bit off kilter on this one as it seems the supplier is making a mistake not charging VAT.
I have decided to wimp out and wait for my VAT guru to return to the fray next week before advising the client.

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By Ruddles
27th Feb 2017 19:02

The supplier is only making a mistake in not charging VAT if they should have charged VAT. It is quite possible that the 'new business' referred to is that of the supplier and that they do not yet need to register. Jackie - for your info, a supplier is someone that supplies stuff and a buyer is someone that buys stuff.

As for alleged abuse, half-baked responses deserve to be treated with contempt.

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By Jackie0802
27th Feb 2017 19:27

Steve if the Czech supplier is registered for vat he has to do one of two things. If his EU customer is registered for Vat he applies the reverse charge. If the EU customer is not registered, or does not supply his vat registration details, the Czech supplier should standard rate the transaction. As your client is not registered he will have to suck up the vat. It's really up to the Czech supplier to apply the correct treatment.

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By Ruddles
27th Feb 2017 20:29

And if the Czech supplier is not registered?

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By shaun king
27th Feb 2017 20:56

He will be registered there is no doubt.

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By Ruddles
27th Feb 2017 21:05

Why is there no doubt?

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By shaun king
27th Feb 2017 21:28

Because if you are registered with the tax authority you are registered for VAT and Corporate taxes. Of course if a log cabin manufacturer selling expensive cabins was trading in the black economy then he wouldn't be registered. He would however be shot at dawn.

I am going to a dawn shooting in Brno next week as it happens - well maybe to visit another CZ SSC.

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Replying to shaun king:
By Ruddles
27th Feb 2017 21:45

I bow to your superior VAT knowledge, then - but are you saying that there is no VAT registration threshold in CZ? Because that does not tally with guidance elsewhere.

For example (and I'm well aware of the folly of citing t'internet):

"A Value Added Tax payer is any subject with a registered office, business premises or site of business, and registered as a VAT payer. In the Czech Republic subjects, whose turnover achieves the sum of one million crowns for the last 12 preceding consecutive calendar months, are obliged to become VAT payers

Another alternative is to become a voluntary VAT payer. This means that a company or an individual applies as a VAT payer of its own volition, in spite of the fact that its turnover has not exceeded the sum required by the law, i.e. one million crowns"

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By shaun king
27th Feb 2017 22:00

The worst thing about the internet is not doing all your research. 1M Cz Cowns is very approx £30000 which is less than 2 log cabins!!!

You should join me next week it could be an education for you !!

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Replying to shaun king:
By Ruddles
27th Feb 2017 22:20

I am very well aware of the exchange rate, Mr King. But perhaps you would now care to explain again why there is NO doubt that the CZ company is VAT-registered. You previously stated that ANY company registered with the authorities would be registered for VAT. Is that now a fiction?

My point is that I don't disagree with any of the analysis of the treatment if the supplier is VAT-registered. Which analysis I referred to in my very first post.

However, since the supplier mentioned a new business, do you not accept that it is just possible that it was referring to its own position and that the sale of the cabin in question was the supplier's first sale? Which, at less than £30k, would not require the supplier to be registered (according to more than one source). It may be an unlikely scenario, I grant you, but do you still maintain that there is NO doubt that the supplier is registered?

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By shaun king
27th Feb 2017 19:24

This is quite simple - The czech supplier is not charging Czech VAT because he is supplying goods to he believes a UK business. the fact that the business is not registered for UK VAT is not understood by the supplier because in most EU countries, a business supply= a VAT registration, but not the UK.

Furthermore, the CZ supplier has got mixed up because he could supply services to a UK non VAT registered business without charging VAT but he cannot supply goods without a UK VAT number of the customer.

So the UK customer agrees a contract for a price inclusive of any VAT and other taxes which may be applicable. It will be the suppliers liability.

While we are at it - Reverse charge only applies to EU supplied services and goods "supplies for acquisition" subject to acquisition tax. Imports can only apply, to the entry into free circulation, of goods which are sent from outside the EU.

See VAT is a simple tax!!

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By SteveRA
27th Feb 2017 19:30

Thanks so much Shaun, I believe you have got to the nub of it. As I said, the client is likely to have given the supplier the erroneous impression that he will one day be a VAT reg business so your analysis is spot on!

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By Dick Stastey
28th Feb 2017 10:24

When did we all establish that there was a supply of goods and not a supply of services? And, if it is a supply of goods, whether or not it is a supply of installed goods?

I cannot see it mentioned anywhere who is responsible for erecting/siting the log cabin.

So Shaun's *superior* knowledge may simply be misleading us all.

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By TheLambtonWorm
28th Feb 2017 10:36

For £16k, I'd certainly expect some sort of erection to be included in the price.

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By shaun king
28th Feb 2017 10:54

Gosh lucky I have a thick skin with my "superior" knowledge!!.

I just hate to say this but I have had a client who purchased and sold log cabins from a variety of countries and you had an option - supply and install or just supply!! Then the EU suppliers realised they could cut the UK middleman out and supply direct. So you buy the log cabin which is delivered off the back off a truck and erect it yourself or pay a local contractor.

It is feasible but unlikely that the supplier will provide supply and install services as you need a concrete base generally to put these cabins on and that needs laying well before the cabin.

Amazing how heated some become on a free advice site!!

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Replying to shaun king:
By Ruddles
28th Feb 2017 11:24

shaun king wrote:

Gosh lucky I have a thick skin with my "superior" knowledge!!.

I just hate to say this but I have had a client who purchased and sold log cabins from a variety of countries and you had an option - supply and install or just supply!! Then the EU suppliers realised they could cut the UK middleman out and supply direct. So you buy the log cabin which is delivered off the back off a truck and erect it yourself or pay a local contractor.

It is feasible but unlikely that the supplier will provide supply and install services as you need a concrete base generally to put these cabins on and that needs laying well before the cabin.

Amazing how heated some become on a free advice site!!


Quite. I assume that when advising your own clients you are not so quick to dismiss possibilities, however unlikely they may seem. In this case, it is a reasonable assumption that the supplier is VAT-registered but it is an assumption nevertheless. And we all know the danger of making assumptions, especially when they are unstated.
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By mrme89
28th Feb 2017 11:09

The thing that surprises me most is that people would pay to stop in a log cabin located in someone's back garden.

The second thing that surprises me is that someone with a turnover (not profit) of just £18k has £16k available to spend on a log cabin.

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By SteveRA
28th Feb 2017 11:36

Just an update, and a further thanks to all who continued this interesting debate last night.

The supplier is not a new business and is VAT registered. The cabin is supply only, but is a very upmarket 'glamping' version. There are no associated services being supplied.

The back garden is an a particularly beautiful part of the South of England and is a well known area for holidaying. But I agree, I would not pay much to stay there either!

Finally, the husband might not earn much but the wife certainly seems to - a dentist!

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