Here is quick summary of what to put on your invoice and your VAT return depending on the type of client you deal with. Keep in mind that it's just a summary and as I said there will be many exceptions.
But it's a good start and it should help you get started if you sell overseas. If you want to understand more about the subtleties of reverse charging, place of supply and so on, please feel free to head to the HMRC website. But beware if you are prone to migraines...
The first thing to assess is whether you sell goods or services. It's not always obvious however: hire of goods is considered a service for example. If you sell goods, the rules are described below:
Client
|
Goods
|
Located in EU - VAT registered
|
Dispatch - zero rate VAT
Print client VAT number on Invoice
Report UK VAT rate on lines 6 & 8
Create EC Sales List (ESL) entry |
Located in EU - not VAT registered
|
Distance sale - charge UK VAT
Report VAT in lines 1 & 6
Do not report on EC Sales List |
Located outside the EU
|
Export - do not charge VAT
Report on VAT return in box 6
|
You should also keep in mind that additional reporting might be required. For example if your distance sale turnover is above the threshold for a given country (in the UK it's £70,000 but it can be as low as €30,000) you must register for VAT in the destination country.
If you sell services however, the rules are more complex and riddled with exceptions (refer to the HMRC article mentioned above as well as this one for the details). What drives the behaviour of VAT for services is the place of supply. The basic rule is that the place of supply is the country in which the supplier belongs if the the client is an end-client (B2C) but the the country of the customer if he is a business (B2B). The easiest way to determine if a client is a business is to check that it has a valid VAT number on the European Commission Web Site or by calling the National Advice Service at 02920 501 261. Not being VAT registered however does not mean that it's not a business. In that case you need to obtain other evidence.
Place of supply
|
Services
|
UK -- e.g. non business customer
|
Charge UK VAT
Report as if the client is UK based
|
EU (not UK) -- e.g. EU business customer
| Do not charge UK VAT Add on Invoice: “Reverse charge service” Report on VAT return in box 6 Add an entry on Reverse ECSL |
Outside EU -- e.g. non EU business customer
|
Do not charge VAT
Report on VAT return in box 6
|
You should also note that if the amount of cross border transactions exceeds £250,000 for the last 12 months, you have to submit a supplementary Intrastat declaration as well.
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