VAT Question

US invoice purchase but benefit recharge to UK entities

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A quick question if I may?

Our US parent company purchased hospitality (for 20 people at a multi-day sporting event being held in the UK for predominatly UK staff and clients) which will now be 100% recharged to two of our UK operating companies.

The US company did not pay VAT on this purchase but I am asuming that with the benefit being in the UK that the two UK companies recharged should be liable for VAT?

Any advice / insight would be appreciated.

Thanks

Richard

 

 

 

Replies (9)

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By Julie.T
23rd Oct 2020 14:43

If the original invoice was made out to the US company and VAT was not charged, then the UK companies cannot claim back any VAT based on the fact that the US company is now billing them for the hospitality day and cannot add VAT on the intergroup recharge (assuming the hospitality was for staff, if it was for clients, their proportion is classed as entertaining and no UK vat is claimable). Why don't you ask the hospitality provider to re-raise the invoices to the UK companies with VAT on so they can claim it? Makes no difference to your group accounts as it seems they were going to reimburse the US company anyway?? Treat it as an intergroup loan that is repaid??

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By Julie.T
23rd Oct 2020 14:43

If the original invoice was made out to the US company and VAT was not charged, then the UK companies cannot claim back any VAT based on the fact that the US company is now billing them for the hospitality day and cannot add VAT on the intergroup recharge (assuming the hospitality was for staff, if it was for clients, their proportion is classed as entertaining and no UK vat is claimable). Why don't you ask the hospitality provider to re-raise the invoices to the UK companies with VAT on so they can claim it? Makes no difference to your group accounts as it seems they were going to reimburse the US company anyway?? Treat it as an intergroup loan that is repaid??

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By bay73
23rd Oct 2020 15:04

Julie.T

Thanks for the response.

Upon re-reading my post I was not very clear in my question.

The questions was not meant to be about reclaiming VAT as we would not look to do so as it is client entertaining.

The question I was trying to ask is that as this transaction is for predominately UK residents and recharged to UK entities, should we not be paying VAT even though we would not be claiming it back?

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Replying to bay73:
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By the_drookit_dug
23rd Oct 2020 15:40

Yes, you should.

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By Bobbo
23rd Oct 2020 17:04

Presumably if your US based parent is invoicing UKco for the costs of client entertainment, UKco records output and input VAT under reverse charge. As client entertainment UKco cannot recover the input VAT so the output VAT is UKco paying VAT.

(perhaps wait for more seasoned VAT experts to comment in case my presumption is nonsense.)

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Replying to Bobbo:
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By bay73
23rd Oct 2020 17:51

Bobbo wrote:

Presumably if your US based parent is invoicing UKco for the costs of client entertainment, UKco records output and input VAT under reverse charge. As client entertainment UKco cannot recover the input VAT so the output VAT is UKco paying VAT.

(perhaps wait for more seasoned VAT experts to comment in case my presumption is nonsense.)

Bobbo - That was my understanding and I will process as such on Monday unless someone offers a differing point of view before then. Thanks!

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Replying to bay73:
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By tom123
25th Oct 2020 09:31

US company cannot invoice anything relating to vat as they won't have a vat number.

Had the UK been looking to reclaim any vat, this route would have trapped it, ie lost out.

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By Matrix
24th Oct 2020 08:18

I don’t know why there was no VAT, wouldn’t the place of supply be the UK? Are you sure?

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By tom123
25th Oct 2020 09:28

I am also struggling to see why no vat was charged.

Could it be that the us parent posted the whole amount as gross, given that they would be unable to claim the vat anyway?

As you say, op, you are not looking to claim back either, so not really seeing the issue.

if the seller made an error it isn't your problem. Potentially the seller could raise a vat only invoice in due course to his customer.

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