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Sales from UK to Finland B2C (Before BREXIT)

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A few questions I am hoping someone may be able to advise on regarding UK sales to Finland which were made prior to 31/06/21.

1. The Finish distance selling threshold was £35,000 - does anyone know how long a business had to register for VAT once the threshold was exceeded?

2. If a business had exceeded the threshold and are now being told to register in Finland and pay the VAT due (for the last few years that it was exceeded), obviously if the business pays this then they are being double taxed as would have paid UK VAT to HMRC. Is the business able to recover the UK VAT from HMRC to then pay this and the excess to the Finnish tax authorities. If so how do they go about this?

Also if there is anything else anyone is aware of that may need to be considered for a business in such situation.


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Jason Croke
By Jason Croke
07th Sep 2021 17:08

When the distance selling threshold is breached, the business is meant to register for VAT as soon as possible. VAT is a self-assessed tax and so it was the responsibility of the business to register in Finland, problem was always that it was difficult for EU authorities to police and so unless the trader was pro-active, nothing much would happen unless they got unlucky.

At the end of the day, the business has filed an incorrect UK VAT return, it has overpaid output tax, so if the value of the error is over £10k, then it follows the voluntary disclosure of error process (VAT652) which involves writing to HMRC, explaining the nature of the error and how much VAT is due back and then HMRC will respond - either a straight refund no questions asked or else a phone call/email discussion, etc.

In the past, the UK VAT collected by the trader and paid to HMRC is refunded by HMRC, but in practice, HMRC tend to issue a refund once they have seen evidence that the trader has registered for VAT in the EU member state and paid that over first, before then refunding the UK VAT back to the trader.

So depending on the numbers involved, be prepared to pay out VAT to Finland first before getting the UK VAT back and also note that Finland has usually been a higher VAT rate than the UK and so the business will be out of pocket as it will have charged customers 20% VAT but will owe Finland at 24% (or whatever rate was applicable at the time of each sale).

You'll also need someone to sort out the Finland side of things, engaging with a Finnish based Accountants or a UK based EU specialist would be advised because they may know local rules and nuances that can help reduce or avoid penalties and can get all the paperwork sorted quicker than trying to DIY.

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