I have a sole trader client whose sales went over the £70k threshold in March 2010. Sales reached £80k and have stayed at that level since. However, half of these sales are management consultancy services to USA client. My understanding of the place of supply rules is that these sales to the USA are simply ignored for VAT purposes.
Does this mean that he has therefore not exceeded the threshold and so does not have to notify the VAT office?
Related resources
Replies (6)
Please login or register to join the discussion.
Should be OK
If you are happy that the supplies are to a business and that, under the place of supply rules, they are in the US then they are outside the scope of UK VAT and don't fall into the turnover calculation.
Thanks for the reply. That confirms what I thought. It just seems such a bizarre rule. VAT is weird!
and so exclude from the flat rate scheme VAT bill?
Presumably for the flat rate scheme, as the services fall into the reverse charge, they are threfore not included in the flat rate VAT liability? As opposed to zero rated sales that would be included.
Yep
Being outside the scope of UK VAT they fall outside FRS turnover. Watch out for the "reverse charge" description as this only applies when within the EU.
me again
So let's say out of scope turnover is £80k, and standard rated turnover is a further £80k. Does that mean that, broadly (subject to specific apportionments, etc), 50% of the input VAT will be disallowed? I know that would be the case if the business combined an exempt and a non-exempt activity, but not sure if "outside the scope" is the same as "exempt" for these purposes.
Looks like flat rate scheme is the best way to go in this scenario.
Hi me again
No, you are OK, full input VAT is reclaimable, no need to apportion, but obviously not applicable for FRS