International VAT Advice

SOTF

Sorry to disturb all of the football chat today, but wondered if we had any accounting experts on here who might be able to offer some free advice?

Essentially, my small consulting firm has won a project with a global brand headquartered in Denmark. As part of the agreement my terms of business / statement of work is with an intermediary company based in the UK rather than directly with the company. Pretty unusual but there's no impact to cost so going with it.

Going through the T&Cs today and I'm unable to charge VAT. The rationale behind this is that I'm being paid from Denmark and regardless of where the cash washes through, makes VAT not applicable. My logic would be that we're performing services in the UK and invoicing a UK based intermediary company, so VAT should be applied.

So... does the very fact that the works being paid in Denmark make VAT irrelevant? Or am I correct and VAT should be applied?

My accountant is 'looking in to this' which usually means a response will take several days.

guinnessaddick

I thought it was where the product/ service is being delivered that relates to whether VAT is charged.

LenGlover

@Off_it knows about VAT

Huskaris

If you're billing a UK registered company, my assumption would be that you would have to charge VAT. 

Assuming that company is VAT registered (a lot of these intermediaries are not) they should then be able to reclaim it. 

You can pay me for my advice in Lego or Carlsberg, if it's anyone else you're consulting for, consider it free. 

PragueAddick

Not an accountant but have done similar work as a small consultancy invoicing across the EU, and I must say I find those T&Cs very odd. If you were invoicing the Danish parent and it too were registered for VAT (must be ,given how you identified them), you need not charge the VAT as long as you quoted the relevant EU directive on your invoice which allows that. But another UK company? They are having a laugh. That intermediary may not be registered for VAT but that is their problem not yours. You cannot not charge VAT just because your client isn't VAT registered.

Sounds pretty suspicious to me, but let's see what accountants such as Off_it have to say.

redlanered

if you are billing a UK company, you apply VAT.  No question.  You're not being paid 'in Denmark' at all - you've no way of knowing (for certain) where the UK company you are billing is getting its cash.

Chizz

Is your accountant charging you VAT?  

SOTF

Thanks everyone! Luckily I don't save lives for a living so the next conversation, whilst difficult, isn't that important in the grand scheme of things.

redman

If the service is in the UK to a UK operation I believe you have a legal obligation to charge VAT.Their conditions can't override the law. 
There are exemptions and zero rated services but on the face of it these wouldn't apply. 

kimbo

I am in VAT hell at the moment charity overseas payments 

SOTF

So a new twist. My contract is going to be direct with the Danish company (a 30,000 employee business so pretty legit), the services will be performed for the Danish office from the UK which makes it VAT exempt. They will then pay me an extra 15% and I have to pay that + VAT to the intermediary. I then reclaim the VAT.

Immediately, I'm questioning why an intermediary, who is no longer an intermediary, is getting paid 15%, effectively just for raising an invoice? I check out the company and not to my surprise, the decision maker in awarding the contract is a Director of said random company.

I'm out. Not paying the correct tax was enough to make this anorak nervous, but potentially money laundering and bribery? No thanks.

redman

Who owns the intermediary company though? If it is owned by the Danish company there is no problem from your point of view. This could be a tax planning move by them if UK corporate taxes are lower than in Denmark who they almost certainly are. 

SOTF

It's not owned by the company, it's owned by the Programme Director, what I assume to be his wife or daughter and another partner. The Programme Director is the person who awarded the contract so doing due diligence and looking at their filing history it looks like he's skimming off the top.

Definitely not an official affiliate of the end client.

cafcpolo

Sounds dodgy as fk, I’d stay well away if I ever had a contract come up like that.

Chris_from_Sidcup

But you're not paying him though as you said the Danish company will pay you an extra 15% to then give to him.

Bit of a pain in the arse and extra finance work but your company is still getting paid (what i assume was an agreed amount) to do the project.

guinnessaddick

Where are you carrying out this service?
If in the UK, then VAT applies, if outside the UK, zero rate VAT.

PragueAddick

The more I think about this, the more it smells. You say the Danish company is a a global brand owner. Well you probably should not even hint at who it is, but I have worked with Carlsberg and there is no way it would sanction something like this. Furthermore Denmark, like the other scandi countries has a business culture which is a fair bit more transparent than that of the U.K. Grubby low level tax dodges and any hint of corruption are massively frowned upon in corporate life. I would steer very clear unless something else emerges that sheds a different light on what you have told us so far. 

Off_it

PragueAddick said:

Sounds pretty suspicious to me, but let's see what accountants such as Off_it have to say.

“Accountant”?

Don’t you swear at me!

Off_it

@SurvivaloftheFittest

You’ve got mail

TeslaGirl

Agree sounds very dubious to me. 

Phoning the VATman is free (although of course you have to wait for an hour or so to get connected) but they will tell you what their requirements are/whether this is legitimate, which is faster than the accountant, cheaper than the accountant and will give you the answers to go back with should you need it.  And the accountant will also have to do all the verification that it's not money-laundering as that's something they are obliged to check.  And charge you for the time doing the check.  And if the VATman gives different advice to the accountant, the VATman's will overrule.

Off_it

TeslaGirl said:

Agree sounds very dubious to me. 

Phoning the VATman is free (although of course you have to wait for an hour or so to get connected) but they will tell you what their requirements are/whether this is legitimate, which is faster than the accountant, cheaper than the accountant and will give you the answers to go back with should you need it.  And the accountant will also have to do all the verification that it's not money-laundering as that's something they are obliged to check.  And charge you for the time doing the check.  And if the VATman gives different advice to the accountant, the VATman's will overrule.

Sorry mate, that’s just not right on lots of levels.

Boom

Off_it said:

TeslaGirl said:

Agree sounds very dubious to me. 

Phoning the VATman is free (although of course you have to wait for an hour or so to get connected) but they will tell you what their requirements are/whether this is legitimate, which is faster than the accountant, cheaper than the accountant and will give you the answers to go back with should you need it.  And the accountant will also have to do all the verification that it's not money-laundering as that's something they are obliged to check.  And charge you for the time doing the check.  And if the VATman gives different advice to the accountant, the VATman's will overrule.

Sorry mate, that’s just not right on lots of levels.

Hark at the accountant!

harveys_gardener

TeslaGirl said:

Agree sounds very dubious to me. 

Phoning the VATman is free (although of course you have to wait for an hour or so to get connected) but they will tell you what their requirements are/whether this is legitimate, which is faster than the accountant, cheaper than the accountant and will give you the answers to go back with should you need it.  And the accountant will also have to do all the verification that it's not money-laundering as that's something they are obliged to check.  And charge you for the time doing the check.  And if the VATman gives different advice to the accountant, the VATman's will overrule.

Except if you phone the HMRC you are highly unlikely to speak to anyone who knows anything about VAT. They will put you on hold while they do a search for your query and quote a general rule that doesn't apply to your circumstance. They will refuse to put their advice in writing nor give their full name nor transfer you to a manager. 21st century Britain.  MTD for VAT became mandatory in April but end of January, nobody had been on the training.  Never mind, just cheat the VATman, they haven't got the staff to do an audit, unless repayments are substantial.

harveys_gardener

SotF as a rule of thumb, if they give you invoicing details with a DK VAT number and billing address, you can check online it is a valid VAT number and you can omit VAT. Ensure the company name, address and VAT number tally.  But you should consider where your services benefit.

kimbo

guinnessaddick said:

Where are you carrying out this service?
If in the UK, then VAT applies, if outside the UK, zero rate VAT.

Reverse Charges!!

harveys_gardener

kimbo said:

guinnessaddick said:

Where are you carrying out this service?
If in the UK, then VAT applies, if outside the UK, zero rate VAT.

Reverse Charges!!

Surely a discussion for the Brexit thread!!!

BowieAddick

Just about to get involved in this myself, husband is currently working in Holland, would be interested to know what directive needs to be added to invoice. Purely labour being supplied. 
Work for company that supplies EU companies and our invoices state "Intracommunity Supply - Reverse Charge" not sure this would apply for labour?

Off_it

BowieAddick said:

Just about to get involved in this myself, husband is currently working in Holland, would be interested to know what directive needs to be added to invoice. Purely labour being supplied. 
Work for company that supplies EU companies and our invoices state "Intracommunity Supply - Reverse Charge" not sure this would apply for labour?

Yes, that's fine (assuming your husbands customer is an EU business, rather than an individual)

Unlike some EU Member States where they insist you quote the relevant EC Directive and/or national legislation, things are much more relaxed in the UK.

This is what HMRC's published guidance (VAT Information Sheet 10/07) states are acceptable narratives;

Reverse charge supplies:

• 'Reverse charge supply'.
• 'This supply is subject to the reverse charge'.
• 'Subject to reverse charge in the country of receipt'.
• 'Subject to reverse charge in another member state'.
• 'This is a UK exempt supply which may be chargeable in the country of receipt'.
• 'This is a UK exempt supply which may be chargeable in another member state'.

harveys_gardener

From memory you have to raise a VAT liability for services from the EU, but then you just claim it back (next period?). Becomes irrelevant Nov 1st, when you will likely pay 70% tariff as 3rd country instead.

cabbles

Off_it said:

BowieAddick said:

Just about to get involved in this myself, husband is currently working in Holland, would be interested to know what directive needs to be added to invoice. Purely labour being supplied. 
Work for company that supplies EU companies and our invoices state "Intracommunity Supply - Reverse Charge" not sure this would apply for labour?

Yes, that's fine (assuming your husbands customer is an EU business, rather than an individual)

Unlike some EU Member States where they insist you quote the relevant EC Directive and/or national legislation, things are much more relaxed in the UK.

This is what HMRC's published guidance (VAT Information Sheet 10/07) states are acceptable narratives;

Reverse charge supplies:

• 'Reverse charge supply'.
• 'This supply is subject to the reverse charge'.
• 'Subject to reverse charge in the country of receipt'.
• 'Subject to reverse charge in another member state'.
• 'This is a UK exempt supply which may be chargeable in the country of receipt'.
• 'This is a UK exempt supply which may be chargeable in another member state'.

This is what we do when we book companies onto our event in London who are based in the EU (outside of the U.K.).  Just get them to tick a box that says reverse charge VAT

kimbo

harveys_gardener said:

From memory you have to raise a VAT liability for services from the EU, but then you just claim it back (next period?). Becomes irrelevant Nov 1st, when you will likely pay 70% tariff as 3rd country instead.

Unless you are a charity with no taxable supplies and you cannot reclaim reverse charge. Which is the pickle I am in.
Always thought RC was a book entry only and no cost to organisation.

 It’s not just EU supplies either. I have recharges from India and been told I have to calculate reverse charges as the place of supply is where the costs end up not when the activity takes place. If that is not true would appreciate your thoughts as it is going to cost my charity mega bucks