A VAT registered client in the UK pays for software subscriptions (GITHUB etc) from the USA on a monthly basis. I told him that he needed to account for reverse charge VAT because HMRC Notice 741A Section 18 states that the place of supply is where the use / enjoyment takes place and these services are VAT'able in the UK. This place of supply is clearly the UK.
However the company accountant (I provide other financial services) has told him he does not need to account for the reverse charge.
Who is right?
Replies (5)
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Hi - not a vat specialist, and do not come across reverse charge very often, but - from what I have read, I would think the reverse charge would apply here. The basic principle is that the customer deals with the VAT rather than the supplier, so that loads of overseas businesses do not have to register for vat. So, the services received would be both his income and expenditure,and he would account for output and input tax on them within the vat return. This assumes that there are no partial exemption issues. Would be interested to see if others agree!!
Yes, agree
Hi - not a vat specialist, and do not come across reverse charge very often, but - from what I have read, I would think the reverse charge would apply here. The basic principle is that the customer deals with the VAT rather than the supplier, so that loads of overseas businesses do not have to register for vat. So, the services received would be both his income and expenditure,and he would account for output and input tax on them within the vat return. This assumes that there are no partial exemption issues. Would be interested to see if others agree!!
Yes, agree, I have an online retailer who pays Google monthly under the reverse charge rules (Boo, hiss, shame, shame)
It is in their case a nil sum game; include on the output side claim on the input side, it is a bit of a pain but as it is only one invoice a month and I rewrote the excel sheets to accommodate it not the end of the world.
No doubt
It's a 4th yes. The notice actually give an example that is relevant here @ 18.10.1
RC transactions are far more common that people think with so much being supplied from offshore these days.
Yes agree
Yes applies to non EU suppliers as well. Logic is that means overseas supplier does not have to register in UK as tax is accounted for. Earlier comment on Partial Exemption still applies in case some of input tax is blocked.