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VAT procedure regarding land in EU

We are a UK business offering our services to another UK business regarding land the EU

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Hi. 

I am trying to find the easiest way of explaining this.

We are based in the UK. The customer at the end of this transaction is based in Italy, and the transaction relates to consultancy services offered to them, regarding land in Italy.

If it was as simple as that, I wouldn't be asking for help. I know that if we were dealing directly with them and they were our customer we wouldn't charge VAT under the DTA. 

However, this customer isn't OUR customer. They are a customer of another consultancy based in the UK. We are that consultancy's sub-consultant.

I assumed we would invoice our hours plus VAT to the other UK consultancy. The VAT we collect gets paid to HMRC. That UK consultancy would claim back the VAT from HMRC as they can't charge UK VAT to the customer in Italy. So whether we charge the other UK company UK VAT or not, it makes no difference to HMRC as we either charge it and it gets claimed back by the others, or we don't charge it and we don't pay it over to HMRC and it doesn't get claimed back by the other UK consultancy. HMRC's balance always ends up as Zero. 

I assumed that the other UK company would then invoice the customer in Italy under the DTA, and the Italian customer would pay the Italian VAT to the Italian authorities. However.....

I have been told by our accountant that even though the Italian company isn't our customer, as it relates to land in Italy, we still can't charge UK VAT. I'm OK with that. I thought I would just not charge UK VAT, the other consultant wouldn't claim UK VAT from HMRC and they would do the DTA thing with Italy.

But no.... I have been told by our accountant that we need to register for Italian VAT, then charge our UK customer Italian VAT, they will have to pay it to us, then they will need to make an EC VAT refund claim via the .gov website. We will need to pay the Italian VAT collected, to the Italian authority. As the other UK consultancy is issuing a non VAT DTA invoice to their Italian customer, the Italian customer just proceeds as normal.

Surely "as normal" means the Italian customer would pay the tax that wasn't charged, over to the Italian authority? Which would mean that they are paying Italian VAT and we have paid Italian VAT.

Obviously, somewhere along the line I have misunderstood something, because it just doesn't make sense. Every time I go back to the accountant and ask for clarification, they just ping me screen shots from the .gov website or links to guidance notes. If I understood that kind of thing I would have been an actual accountant but I don't and I'm not. Yet with every answer comes a bill. So I'm fed up with asking them, I am now asking you for help.

Here's hoping.

Many thanks in advance.

 

 

Replies

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08th Mar 2019 17:20

If you break it down it becomes quite simple.

First of all, the DTA is irrelevant.

If the services are land-related and the land is in Italy the supply is made in Italy regardless of residence or status of client.

Since the client does not belong in Italy the reverse charge cannot apply.

You therefore need to register in Italy (assuming turnover is above Italy registration limit, if there is one).

Thanks (1)
to Wilson Philips
09th Mar 2019 09:59

Absolutely right.
My only quibble is that there are no registration thresholds for non-national taxpayers, so registration in Italy will be obligatory irrespective of turnover.

Thanks (1)
to leshoward
09th Mar 2019 10:05

Thanks, Les - that’s why I included the proviso at the end! I suspected that would be the case, but didn’t have access to reference material at the time.

Thanks (1)
avatar
08th Mar 2019 18:50

Screenwipe wrote:

Every time I go back to the accountant and ask for clarification, they just ping me screen shots from the .gov website or links to guidance notes. If I understood that kind of thing I would have been an actual accountant but I don't and I'm not. Yet with every answer comes a bill. So I'm fed up with asking them, I am now asking you for help.

You need a new accountant - one who you trust when they give you a response. Why would you trust internet randoms more than your appointed accountant?

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to Accountant A
08th Mar 2019 23:31

As an ‘internet random’ I agree. My response was based on the info presented but you need to speak to an accountant that is fully aware of all facts.

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to Wilson Philips
09th Mar 2019 13:21

Wilson Philips wrote:

As an ‘internet random’ I agree. My response was based on the info presented but you need to speak to an accountant that is fully aware of all facts.

Not a criticism of you or any particular poster. It's just bizarre that someone would seek the advice of anonymous people he has zero background knowledge of, over his paid professional adviser.

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to Accountant A
09th Mar 2019 13:31

No worries - no criticism taken!

It is equally odd that one would seek advice from someone that knows zero about the questioner’s circumstances.

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09th Mar 2019 09:41

From the way you phrased your question you are the sort of client that the better firms of accountants are crying out to meet.
Your current accountants aren't up to looking after you any more even if they were before. Could be you've outgrown them. Now's the time to take action.
Start looking for other accountants. Take your time, ask several of them how much advice and time they can give you on issues like this and others and what resources they have. Then compare and contrast, accepting that the fees might be higher for the ones you rate, but worth every penny.
If you just stick with your current accountants and moan - as so many other people do - you're not doing yourself or your business any favours.
It's not difficult to change accountants. Your new accountant will do all the heavy lifting for you.

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