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Permanent Establishment? VAT/Income Tax

Returning self employed UK national, at what point is permanent establishment switched to the UK

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Any views on the VAT and Income tax treatment would be very much appreciated.

Returning British national who has lived in Bulgaria (rented) for many years.  She started management consultancy work in Manchester (IR35 not relevant) in August 2017 and invoiced them from her home in Bulgaria.  She travelled to the UK during the week to fulfill certain duties and this became more frequent.

It went well so the family moved to the UK (rented) in February, 2018 and carried on as self employed status. The family decided to completely stop travelling back to Bulgaria at weekends/holidays and moved permanently to the UK on the 1st July, 2018.

Our intention is that the Bulgarian accountants will declare profits on the self employment to the Bulgarian authorities for the period August, 2017 to the 30th June, 2018. After that date it seems clear that the permanent establishment was moved to the UK.  We will report self employment in the UK from July, 2018 to January, 2019 when she will take a job as a Director with an unconnected party.  The double taxation agreement between UK and Bulgaria seems sound on this (subject to agreeing when permanent establishment was made but we are content that until July, 2018 the economic and social base for the individual and the family was in Bulgaria). 

UK VAT thresholds would have been exceeded by the invoices raised whilst in Bulgaria but as the service was business to business management consultancy VAT was not charged (her Bulgarian accountants did not register her for VAT in either Bulgaria or the UK).

She has continued to invoice on a freelance basis and will do so until January. The period 1st July, 2018 to 31st January, 2019 will produce revenues under the VAT registering threshold. 

Any views on the UK VAT situation would be appreciated, and confirmation (albeit on these sketchy facts) that it would be appropriate for the Bulgarian self employment to be treated as running until permanent residence was established in the UK so only post 1st July, 2018 profits need to be declared in the UK.

There is no UK tax residence under the statutory residence test rules for 2017/18.  It seems that Bulgarian tax residence would hold sway under tie break rules through to 30th June, 2018 but she will be assessable on world wide income in the UK for 2017/18 (with credit for Bulgarian tax).


Lived in Bulgaria 2006- 30th June, 2018

Contract with Manchester business whilst based in Bulgaria August 2017 to 30th June, 2018   - declare taxable profit in Bulgaria as a Bulgarian tax resident

Revenue between August 2017 and 30th June, 2018 was £100K

Moved to UK permanently on 1st July, 2018 (though had rented accomodation for self only from February, 2018)

Declare self employment in the UK for period 1st July, 2018 to 31st January, 2019 (income less than £80,000)





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14th Dec 2018 16:10

Liability for VAT depends on:
- where the client makes taxable supplies. Are those made in the UK? Or, is the customer(s) outside the UK? In business or private persons?
- where does the client has its personnel and other resources to enable it to deliver its services? Are those now in the UK?
If a non-UK person makes supplies in the UK, there is no registration threshold, so that is something which needs to be noted.

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