VAT Domestic Recharge - Intercompany Invoices

Does the New VAT Domestic Recharge effect Intercompany Invoicing

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Myself & my FD are under dispute as to whether the new VAT Domestic Re-charge applies to Intercompany Invoicing.

I say yes as both companies are VAT Registered and under the CIS Scheme (all our work is Construction) and he believes not as it's Intercompany.  Neither of us an find any literature or guidence on the  HMRC site and we have been waitng for a call back from HMRC VAT department since the beginning of February.  Yes we have tried again and we are just being told they are inundated with questions at this time and will get back to us as soon as possible.

Anyone here come across this yet or have an opinion this would be greatly appreciated.

 

Replies (10)

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By paul.benny
17th Mar 2021 13:01

The 'technical guide' is here: https://www.gov.uk/guidance/vat-reverse-charge-technical-guide

There would seem to be some exceptions. Do any of these apply in your case?

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Replying to paul.benny:
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By DP Taxation
17th Mar 2021 13:29

Thank you but we have reviewed these already and none apply.

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By Jason Croke
17th Mar 2021 13:06

Unless you are in a VAT group, then inter-company transactions follow the normal VAT rules. You don't state what it is you are recharging and that makes a difference to the answer.

It could be argued the recharge is a disbursement but the rules for disbursement are quite precise and all conditions must be met for it to be a disbursement https://www.gov.uk/guidance/vat-guide-notice-700#section25 - section 25

If the recharge is just of employees who are employed by one entity but work across both companies, you can consider paymaster services https://www.gov.uk/guidance/companies-that-supply-staff-and-staff-bureau... - section 3.3

So the question you ask is quite nuanced and doubt HMRC will give you an answer. What is it that Company A is supplying to Company B? Staff, construction services, materials, something else?

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Replying to Jason Croke:
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By DP Taxation
17th Mar 2021 13:33

Thank you Jason.
We are no longer in a VAT group which is where I think my FD's thought path is lying.
Basically Company A is supplying Labour, Materials, Plant, all under Construction as previously mentioned to Company B. Hence my thought that although we are connected the DRC applies. Your thoughts are appreciated

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Replying to DP Taxation:
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By vraithatha
19th Mar 2021 19:01

And what role does Company B have? If it’s an end user then DRC does not apply.

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Replying to vraithatha:
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By DP Taxation
19th Mar 2021 20:38

No unfortunately neither company is an end user otherwise the answer would have been nice a simple.

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By paul.benny
17th Mar 2021 13:58

So why does your boss think DRC doesn't apply? Let's hear the arguments on that side.

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Replying to paul.benny:
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By DP Taxation
19th Mar 2021 20:44

He believes because the companies are connected, although no longer in a VAT group, that DRC wouldn't apply but I can find no indication of this in the legislation.
He thought he read it somewhere but now we can't find it. I wonder whether it was intermediary's he read about but again this doesn't apply unless one of the companies is an end user.
I really would appreciate some input in regards to how it wouldn't apply.

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Replying to DP Taxation:
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By paul.benny
20th Mar 2021 08:07

Everybody here has said DRC is applicable in your case - or a least there is no reason for it not to apply.

The only contrary "evidence" is your boss thinking he read it somewhere.

Ultimately he is accountable for the VAT return and he has a choice: go with what he thinks he read; follow the guidance, your expertise and the weight of advice here. Or pay the company's advisers for some formal advice.

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Replying to paul.benny:
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By DP Taxation
20th Mar 2021 08:14

Thank you Paul. I have greatly appreciated your input.

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