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Business... or consumer?

8th Dec 2014
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As we get ready for the VAT changes coming in next month, we’re having to put in place processes for invoicing our non-business EU customers using their local VAT rates and invoice rules.

“How do we know who are the business customers and who are the non-business customers?” No 2 asked me one morning last week.  “Is it if you’ve got their VAT number and it’s a valid VAT number, they’re a business, and otherwise they’re a consumer?  Don’t the EU have non-VAT-registered businesses like we do?”

Now I had always understood that if you don’t have a valid VAT number for EU sales, you had to charge UK VAT (which will soon become local VAT).  After No 2’s questions, I decided to have a closer look.

HMRC’s initial guidance says that the place of supply is where the customer belongs if the customer is “non-business”, and they also describe who a non-business customer is:

·      “A private individual

·      A charity, government department or other body which has no business activities

·      A ‘person’ who receives a supply of services wholly for private purposes”

This second Notice also says that a VAT number is the best evidence that a buyer is a business customer, but that alternative evidence (like a letterhead) can be accepted – and that “For some supplies of services it will be clear that the supply would not be purchased by anyone for a wholly private purpose.”  The latter I include only as a point of interest, because our software is definitely used for both business and private purposes – but I do wonder if certain software providers, like those selling BI software, always get to use the B2B rules?  I digress.

My answer to No 2 was that we could look at collecting alternative evidence from our EU suppliers to show they’re businesses.  I’ve asked him to undertake that project early in the New Year.  We’ll see what he comes up with – and whether we’ve been charging UK VAT where we shouldn’t have done.  That could be a good case for a refund.

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