VAT out of scope question

vat out of scope question.

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How should a UK-registered car hire agency, primarily engaged with international customers and rental providers, handle VAT accounting? For instance, if an Australian customer pays £100, and the agency pays a South African rental company £90 for a car used in South Africa, resulting in a profit of £10. My assumption is that the £100 falls outside the scope of VAT, but the £90 should be subject to a reverse charge. How would you recommend accounting for VAT in this scenario for a UK-registered car hire agency operating predominantly with overseas customers and rental agencies? Could the agency just account for the £10 commission as an alternative (also outside scope).

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By David Ex
12th Feb 2024 15:33

Last November you said you had “shifted my career focus seven years ago and haven't dealt with much tax or accounting since”.

I personally wouldn’t be advising on complicated cross-border transactions without relevant recent experience.

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By Jason Croke
12th Feb 2024 15:47

Who is supplying what to whom?

I prefer the OP's last sentence and treating the £10 as agents income but it will all come down to what the agreements and contracts between agent and supplier states, it also matters how the transactions are carried out (ie, they must follow what the contract/agreement states is happening).

Impossible to give a clear answer one way or the other as the structure of the arrangement will reveal the answer, if there is no arrangement/contract, then now is the chance to have one drafted.

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Replying to Jason Croke:
By DKB-Sheffield
12th Feb 2024 16:18

Jason Croke wrote:

Who is supplying what to whom?

In this instance, I'd be tempted to put 'and where?' on the WISWTW.

Methinks this question has the potential to be a considerable 'onion de-skinning' process! As there are no documents to view, no idea of who the customers are, and no clue as to whether this is a packaged supply or agency agreement, I don't think ir's one for a forum!

I'll be honest, I started trying to work out how RC fits in with the SA transaction and gave up! Must be a Monday thing!

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13th Feb 2024 01:43

What is the supply ? The car hire itself or a commission ? Are receipts from the customer of £100 flowing under an Agency relationship such that they are receipts on behalf of the principal(s) overseas plus a separate mark-up ? Is any agency relationship disclosed or undisclosed ?

Until you straighten the basics out you won't be able to work out how to VAT-account so you'll need to scrutinize the relevant contracts for services and understand them properly.

As regards the reverse charge in relation to short-term hire of a car overseas generally.... consider the place of supply rules in that context >>>

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