We have a EU customer who we bought raw materials and packaging for as requested. However, we had to dispose of the raw materials within the UK as they exceeded their accepted shelf life. Therefore, we will be raising a recharge invoice on the EU customer for the costs incurred but I was wondering how this should be treated from a EC Sales List classification point of view e.g. is it to be treated as goods even though their was no physical movement to the EU or do we classify it as services.
Any help on this matter would be greatly appreciated, thank you.
Kind regards,
Keian
Replies (3)
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Call it a cancellation fee? Whatever you are charging them for, it isn't a supply of goods ...
It sounds like you have bought goods on your own account, intending to utilise them to make a product for your customer.
If this is the case, as WhichTyler says, there is no supply of goods. There is also not a supply of services either - you merely are disposing of your own goods.
The charge to your customer looks like damages. He is effectively in breach of contract and is reimbursing your losses. Damages are not a taxable supply and therefore no VAT is due and there is nothing to report.
depending on the workding of the contact, ther emight have been a supply of services. The OP says 'We have a EU customer who we bought raw materials and packaging for as requested. '
Doing what your customer requests in return for money is usually a supply of services...