VAT and EC

VAT and EC

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.........hopefully a simple question - should his supplies be exempt or zero-rated? He is a UK VAT registered business.

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By spidersong
11th May 2010 17:00

A simple question?!?

Firstly why would his supplies be exempt? They're likely to be standard, zero, or outside the scope, unless the supplies are already exempt in which case it makes no difference where or who the client is.

Have the European Commission claimed zero rating on these services? unless you're dealing with a VAT registered part of the European Commission then the procuring office/officer needs to provide a certificate of entitlement to allow any zero rating.

You may want to review section 14 of HMRC Notice 725, and also Notice 48 on Extra Statutory Concessions which includes the following:

"2.6 VAT: Supplies to diplomatic missions, international organisations, NATO forces etc. in other EC countries

A VAT registered trader can zero-rate supplies of goods, (other than new means of transport), or services made to entitled persons and bodies resident or situated in other EC countries provided:

the goods or services are for either the official use of the entitled bodies or for the personal use of entitled members etc. thereof;the supplier obtains from the customer an application for exemption from VAT under Article 15.10 of the Sixth VAT Directive (or, if not available, a written order/certificate confirming eligibility under that Article);in the case of goods, they are removed to another EC country; andthe supplier obtains and keeps proof of removal of the goods to another EC country within three months of the time of supply. This should be the commercial proof of export or removal normally acceptable for VAT zero-rating purposes."

If the supply isn't covered by the concession i.e. no certificate provided, then you need to look at what the client's actually doing, and where i.e. you'd need to review place of supply rules to decide if the client was acting in the UK and needing to charge UK VAT or acting outside the scope, with possibly an obligation to register in another EU state. You'd also need to consider when the supply took place, as the place of supply rules changed back in January. And you'd also need to know whether the end customer has a valid EU VAT registration number.

Basically there are no simple questions in VAT other than "should I consider VAT as my primary career choice?" (to which the answer is No!)

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