Flat rate VAT scheme and services to the EU

Flat rate VAT scheme and services to the EU

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Hi,

I'm on the flat rate VAT scheme and will be providing services to a large European firm. They have seperate group companies in the UK, Belgium and Luxembourg.

I could contract with any one of these, but was wondering how the flat rate scheme would be accounted for in the non UK, (but EU) countries?

From what I can see I should contract with the UK branch and invoice in the standard way...are there other (tax) advantages to working for a non-UK company I may have missed?
KP

Replies (18)

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By deanshepherd
01st Mar 2007 10:21

I agree with Steven..

Your invoices to EC countries WILL be included in the calculation and if these are to be zero-rated then you will be very much out of pocket.

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By alansmoore
01st Mar 2007 15:00

Steven and Dean

Steven
Sorry
speed read your answer and skipped the caveat that you put in over certain services which I also tried to clarify in my post.

Dean
I had a conversation with and advisor on the subject of this and also the reverse where a customer in the UK receives a service and has to account for the vat as a reverse charge which cannot be reclaimed (another area where the calculator on HMRC's website fails to inform people the full implications of flat rate vat scheme).

An associate had told me that it did not apply, would not need to be reported on the vat return and had a call reference number from HMRC helpline clarifying it.

The short of it was that the advisor told me that the advice given to my associate was incorrect and they would be giving the helpline advisor more training (So we cannot rely on the helpline either!!)

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By alansmoore
28th Feb 2007 15:16

EEC
If you provide services to EEC customers you do not need to include the value of those invoices in the fixed rate vat calculation.

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By User deleted
01st Mar 2007 12:44

Advertising consultancy services
To clarify:

I would be providing advertising services (consultancy) - which I already supply to two other clients in the UK, and the activity (for the most part) would be conducted in the UK.

It looks like invoicing the UK operating company is the way to go as first suspected...

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By alansmoore
01st Mar 2007 10:48

I don't fully agree with the previous two but
It does depend on what type of service and where the supply is deemed to be made however supplies of services to customers in the EEC are not included in turnover for fixed rate vat calculation.

The types of services that this would apply to are marketing, accountancy etc.

This has been confirmed by HMRC and was widely reported on the bbc programme 'working lunch.

If you supply labour working on projects in this country however you would have to include it in your turnover for flat rate vat purposes

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By AnonymousUser
01st Mar 2007 11:10

Which bit do you not agree with Alan?
If you provide services to an EU (or any) customer but the work is done in the UK then the basic rule is that the place of supply is the UK (and therefore subject to UK VAT and included within flat rate turnover). The guy who posted the question was not specific about what services he supplied and therefore they might fall within one of the exceptions to the basic rule and his services would be outside the scope of UK VAT (and excluded for flat rate turnover). He also did not specify if he provided the services elsewhere than the UK ... in which case they may be outside of the scope of VAT (and excluded from flat rate turnover).

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By deanshepherd
01st Mar 2007 11:15

Interesting..

..article by BBC2's Working Lunch programme (here).

However, I can find no support for this on HMRC's website. Indeed the legislation, and HMRC guidance notes, indicate otherwise (see here).

I have written to HMRC to clarify their position, and any revision in their interpretation of the legislation, but I would not expect a response any time soon.

If anyone else can point in the direction of something more definitive than a BBC article I would be much obliged.


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By deanshepherd
01st Mar 2007 17:04

Hmmm..

I think I would need more than a BBC article and a helpline reference to start advising my clients to go against what is written in the legislation.

I shall wait and see what response, if any, I get from HMRC.

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By User deleted
28th Feb 2007 17:06

Fair enough but
I will be supplying mostly labour, so the flat rate claw back is a bonus - would I still charge the EU country 17.5% vat and then ignore it i.e. keep it!

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By AnonymousUser
01st Mar 2007 09:16

Place of supply
of your service is important in this as it defines if and when VAT is chargeable. VAT notice 741 will guide you through it. The basic rue is that services are supplied where you belong and would therefore be subject to UK VAT at 17.5% but there are exeptions as laid out in 741. Goods supplied to EC countries would be zero rated and therefore included within your flat rate turnover.

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By User deleted
07th Mar 2007 11:32

Advertising out of the scope?
Hmm, that's interesting, why is a flat rate percentage even offered for consultancy and advertising firms?

I hope it is in the scope because I've been using it for the best part of two years with my UK clients!

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By AnonymousUser
07th Mar 2007 12:02

Don't get confused KP!
It is only outside the scope of UK VAT if you supply to customers who aren't in the UK i.e if it falls within the exemption (which I haven't looked at personally) then the service is supplied where your customer is situated. If your customer is in the UK just ignore this whole debate!

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Euan's picture
By Euan MacLennan
07th Mar 2007 13:40

Where does recipient belong ?
KP said he could contract with a group company in any of the UK, Belgium and Luxembourg. He may have the choice, but it does not affect the VAT treatment. s.9(4)(b) VATA 1994 says that where the recipient has establishments in more than one country, the recipient shall be treated as belonging in the country in which the services are most directly to be used. So, if your services are to be used in the UK, but you are billing Belgium, you have to charge UK VAT at 17.5%.

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By Martin Telfer
07th Mar 2007 14:33

More on Dean's HMRC link
The answer to the specific question is given at 12.3 of the Flat Rate Scheme Booklet:
"The VAT due on services to other Member States depends on the place of supply of those services, see Notice 741 Place of supply of services. If your supplies are outside the scope of VAT follow paragraph 7.3 and do not count them as part of your flat rate turnover."

Which is pretty much exactly as Dave said.

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By User deleted
08th Mar 2007 00:05

So as I thought...
OK, so I have to invoice as if I'm in the UK, so I may as well contract with the UK branch and invoice them with my services, clawing back my flat rate VAT as per usual...

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By AnonymousUser
04th Apr 2007 12:38

Working outside of the EU
I work outside of the EU about 1 month a year on the development of water resources and occasionally do a few days on these projects in the UK. I don't include these in my Flat Rate scheme as I believe them to be outside of the scope of VAT because I take my point of supply to be outside of EU. Is there any possility that this is not the case?

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By User deleted
04th Apr 2007 16:53

Where is your client based
Hi,

Where is your client based?

I'd add the out of UK work days to the invoice going to the UK based company and charge VAT.

Does that mean you are paying the flat rate % on you revenue - ouch!

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By AnonymousUser
05th Apr 2007 09:52

Client base
Southern Africa

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