Reverse charge on intercompany recharges from o/s

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Hi all. I am analysing intercompany recharges from a NZ group company to a UK HQ company. I am slighly unsure whether to apply VAT reverse charge on salary, social security etc (basically costs of employing a couple of staff). These are the employment costs of a couple of employees, who are on a NZ payroll, but their costs are recharged to UK due to a particular agreement made by business leaders. My professional opinion is, that these costs are subject to a RC as they constiture a service provision, but I thought I would ask the question,,

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By stepurhan
25th Jun 2024 13:07

I agree that it sounds like a service provision.

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Trevor Steel
By Trevor Steel
25th Jun 2024 22:44

Is there any direct contract of employment between the individuals and the UK company? If there is, the NZ company is simply providing a payroll service, and it is only any admin charge made for doing so (i.e. amount in excess of recovery of salary, social security costs) that would be a service subject to reverse charge.

If there is no direct contract of employment, there is a service being provided. Whether it's a supply of staff, or of the work that's being undertaken by the staff, will be dependent on various factors -such as who is responsible for control and direction. But unless the nature of the service falls outside the B2B general rule, place of supply will be the UK and a reverse charge is required.

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Ivor Windybottom
By Ivor Windybottom
26th Jun 2024 09:08

Joint employment is covered in para 3.2 of Notice 700/34 "Supply of staff and staff bureaux".
Directors fees are also something that do not represent a supply, as the director is providing personal service to the company. Any cross-charges for these are not subject to VAT (no supply).
Other than that it is likely that a VAT-able staff supply arises (reverse charge), unless you can successfully show it is a non-business activity (very unlikely in this context).

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Replying to Ivor Windybottom:
By LW64
26th Jun 2024 09:33

But, don't forget that Directors fees re an overseas director cannot fall under STBV so there will be a tax liability generated.
You would need to look at an amount going through the UK payroll re the hours in the UK to satisfy that liability.
Different issues and need to make sure that all areas of the business understand the implications.

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