Reverse-charge conundrum! We are a UK limited company, supplying a service to a company in the Czech Republic. We are not registered for VAT and don't want to be - ever. Any UK taxable supplies we make will be under the threshold. The Czech company is registered for VAT. HMRC has confirmed that, because we are not registered, our invoices are not subject to the reverse charge by the Czech customer. This keeps things simple for us - and we know that supplies to another member state don't count towards the threshold anyway.
But here's the problem. The customer wants to reverse charge anyway. Perhaps he's playing safe or Czech VAT law is different to UK VAT law. If they insist on reverse-charging, does this mean we must register for VAT in the UK (or the Czech Republic) and/or fill in the EU Sales List? We don't want to do any of these.
Many thanks.
Replies (9)
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Yet again HMRC comment on another Member States VAT system and get it wrong. If the UK company supplies services to a Czech company. The Czech company is required to account for the REverse charge in the Czech Republic. The UK company, if it remains below the registration limit, is not required to register for VAT.
Most Member States because that have a low or non existent turnover limit cannot understand how a UK supplier can supply goods or services without a UK VAT number.
Don't ever be surprised if HMRC give you doubtful information on another Member States VAT system, THey assume that the interpreation of the rules is the same in all States and having dealt with most States VAT systems for clients I can assure the interpretation on matters differs dramatically in some cases.
As to the EC Sales list if the company is not VAT registered then it has no requirement to complete an EC Sales List.
In answer to questions 1 and 2 the answer is yes. However, the value of your supplies made to the Czech company is included in the value of taxable supplies for the purposes of determining whether you are required to be registered for UK VAT.
point 3
Shaun - are you sure that the reverse charge sales count towards the UK VAT sales threshold? I've had correspondence with HMRC for a trader in a similar position. Including the reverse charge sales took them over, excluding kept them below. HMRC wrote back to say that as the r/c sales were outside the scope, sales were therefore below threshold and no need to register.
OOOPS I was thinking they had received rather than made the supply, If you make the supply you can exclude the value of any sales where the Place of Supply is outside the UK as in this instance the Place of supply is Czech Republic.
As I tell my children read the question and answer carefully - back to school for me - Sorry
what about the other way round?
A non-vat registered business in Uk receives an invoice for services from EU vat registered company and it states reverse charge apply?
I believe they should charge uk customer vat on the services because uk based business is not vat registered.