EU VAT

EU VAT

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Hello

I have a new client and bit confused about his VT treatment.

A dentist client who also provide cosmetic (vatable) services.

He buys most of his dental suppliers from EU, which means zero rated suppliers as he is UK VAT registered. 

In last 4 quarters he has not performed any cosmetic service, all of his sales were exempt.

I feel like he is on VAT scheme just to avoid EU VAT and as his suppliers are from EU which means his COS are 20% cheaper as compare to other competitors.

Is there any problem with his current set up? His end users are not paying any output VAT as his suppliers re exempt! 

Thank you very much

Qadri

Replies (4)

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By spidersong
14th Aug 2015 14:08

Why are his COS 20% cheaper?

If those goods are being used for his exempt business then he'll suffer the 20% as part of his partial exemption calculation in relation to the acquisition tax that he's accounted for in Box 2 of the VAT return which then won't have full recovery in Box 4.

He has been doing acquisition tax and including it in his PE calculations hasn't he?

 

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Replying to Anonymous.:
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By qadri23
14th Aug 2015 15:01

PE...!!

Thank you for the answer

PE is nil as client did not make any standard VAT supply therefore last 4 quarters no input VAT was claimed (I am new to this client and may need more info from ex-accountants).

I asked my client if he knows which EU supplies should be exempt as medical supplies and his answer is he doesn’t know!!

My main issue here is that in the same invoice there must be items VAT exempt and some are now zero rated (due to EU VAT legislation), but it’s impossible for me to differentiate  what amount to take into box 2.

I can see last accountant did not include anything in the box 2, but I am uncomfortable…!!

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Replying to Arcadia:
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By mely
14th Aug 2015 15:22

Hi Qaudri23

You're not overlooking your client has to pay acquisition VAT on the imports, as if he'd purchased them from a UK supplier?

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By spidersong
14th Aug 2015 16:13

Surely he knows goods from services...

Surely he can tell which are goods and which are services for a start. And it's likely that most of the goods will be standard rated.

Indeed what elements are likely to be exempt? the exemption largely relates to services provided by registered medical professionals, and I'd assume he's not subcontracting actual dental care to other EU member states. Prostheses (false teeth and dental plates) can be exempt if provided by a registered dentist, I'm not quite sure how that stands with foreign registers of dentists since UK law mentions UK registers, but an ECJ case relating to Holland seemed to indicate that Intra EU supplies of prostheses could be exempt where supplied to a registered dentist or dental technician, although I can't (based on the limited research I've done just now) find a UK steer on this.

So we might have exempt prostheses if he's farming out such work to foreign labs, but normal goods or goods for his own use will be taxable. Services might need looking into some more.

But I'd be very surprised if there wasn't a reasonable amount to take into Box 2 (or to Reverse charge if there are services) and so it almost certainly needs looking at over the last few years!

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