VAT

Your business has the chance to sell goods to private customers in the EU and you are aware there is a low value tax scheme. What is the threshold for these sales and what must you consider to avoid a problem with the EU tax authorities?

Q. Our premises includes a recording studio with specialised equipment which we hire out to local bands and performers, charging VAT on the fee. We have received an enquiry from a French band and they have refused to pay the VAT because they are based outside the UK. Are they correct? A. Most supplies of services provided by a UK business to an overseas business customer are not subject to VAT because the place of supply is deemed to be the customer’s country. This is known as the general business-to-business rule. If the customer is based in the EU, they will account for output tax on their own return by doing a reverse charge calculation, usually claiming input tax for the same amount. However, you are hiring goods to the band - the recording equipment - and the hire of goods is subject to a “use and enjoyment” override. In other words, it is all about where the band will be using your equipment, which is the UK, so UK VAT at 20% VAT must be charged on your fee. The fact that they are based in France is irrelevant. ...

If you buy goods or services from an EU country that you import for use in your UK business, you must usually deal with the VAT ins and outs through your quarterly returns. But what about VAT paid on purchases made while in an EU country?

Your business buys online advertising to increase the number of hits to your website. Most of the advertising charges are invoiced by EU suppliers and two of them are charging local VAT. Is this correct and what action should you take if not?

Q. Our company is incorporated in the UK and the office address of our UK-based accountant is the registered address with Companies House. We have no trading premises or staff in the UK and all decisions are made from our head office in Ireland. The company imports and sells stationery to private individuals in the UK but we have not registered for UK VAT because our annual sales are less than the registration threshold of £85,000. But is this correct? ...

Your business sells services to both charities and private individuals, i.e. on a business-to-consumer (B2C) basis. You have always charged VAT to your EU-based customers and not to those resident in non-EU countries. But is this correct?