I hate VAT and try and stay away from it at the best of times but I think I am having a breakdown!
A while back I looked at the vat position for a business which provides software online to be downloaded.
Basically total turnover is over the threshhold but at the time I looked into it and found that supplies to non-EU countries was exempt income and would not be counted as taxable supplies. As most of his income (probably 70%) was to non-EU we decided that it was fine and no need to register.
Just looking at it again for another client and can only see the turnover being called either zero rated (therefore included in taxable turnover) or outside the scope of VAT (excluded???).
Help me please before I jump!
Jimi Hendrix
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Replies (3)
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Outside the scope
Down loads of music to a customer that belongs outside the EU is outside the scope of UK VAT so will not count towards the turnover limit.
Many people still call this zero rating either as short hand or through ignorance, but it can cause headaches as you've found out!
VAT 741
The guidance is in VAT 741. It is a long and complicated document, but if your particular downloads are covered in para 13.13, they are treated in accordance with para. 12.3 as being supplied where the customer belongs and if that is outside the EC, the supplies are outside the scope of VAT and do not count towards the registration threshold.
Thanks
Barry
Thanks for that. You don't have a link to an HMRC leaflet or any legislation do you? Would like to nail this one to the wall!