Client sells services to customers outside the UK. Place of supply of service is in customer's country, therefore reverse charge supply and outside the scope of UK VAT.
Do I have to restrict input VAT recovery in an analogous way to the recovery for partially exempt traders? Or is that too logical for the wacky world of VAT?
Replies (3)
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No
There is no input VAT restriction when you make reverse charge supplies. However, reverse charge is not a blanket exemption from charging UK or overseas VAT - you should check that the conditions are met for the reverse charge to apply (e.g. it would only apply to customers within the EU who are actually businesses).
So
Just to clarify (if I may), is the reverse charge system outside the scope from the suppliers point of view, so it is ignored entirely for partial exemptions?
Yes
Just to clarify (if I may), is the reverse charge system outside the scope from the suppliers point of view, so it is ignored entirely for partial exemptions?
That's my understanding - since the place of supply is outside the UK, then the supply is outside the scope of UK VAT. The supply is instead within the scope of VAT in the EU country where the client is located (let's say France). Reverse charge is the mechanism which means the supplier doesn't need to register & charge French VAT; the French client will assess itself to French VAT instead under the reverse charge mechanism.