Should I register for VAT?! (International Services Confusion)

[Anonymous]

Hi.
I’m a new member here, had to wait to be approved – thanks for that… this place is really useful 🙂 (Where’s the donate button?!)

I’m CEO of a Panama company. All income comes through my limited company. As of yet, my income wasn’t large enough to be concerned about VAT. This year it may be.

Simply, I receive payments from a Maltese bank from the Panama company (I can ask them to change the bank they pay from, if necessary), in the past it was a Swiss bank. All the work is done by me in my UK Office, but all for the company based in Panama (mainly a consultancy business).

Say, in 2012, I receive 250,000GBP from this company (as my only income). These are my questions;
– Should I register for VAT?
– If so, why?
– If it’s to do with bank, what bank location should I request a change to?
– Is there any threshold of money that can change this situation?
– If I pay big expenses (say 50,000GBP) to a company in Isreal, does this change anything for me?

Thanks for any advice, like I say, if you have a donate place, please direct me to it 🙂

[Marie Stein]

Hi Wooty

Thanks for the compliments and the offer to donate! If I’m able to help, then I’m happy if you can just mention the site to any accountants/business owners who may have VAT issues.

Unfortunately I can’t answer your questions at this stage as I need more information. As you’ve doubless already realised, the whole subject of VAT and international supplies of services is really complicated and I’d need a lot more information to give you any meaningful reply.

Let’s go back to basic VAT rules. If your income (or that of the company) exceeds the VAT registration limit, which is currently £77k pa, then you need to register for VAT. However, HMRC may allow you not to be registered if you would normally be claiming input tax because most or all of your income is not liable to VAT.

When the business provides supplies of services to overseas clients, then there are a number of factors (referred to as the “place of supply” rules) that establish whether or not the income is liable to VAT.

So to establish whether the Panama company’s income is liable to VAT, we need to consider a number of factors. These include :

• The nature of services that the Panama company is providing to its clients.
• Where are the clients based?
• Are the clients businesses or private individuals?

I’m also a bit unclear about the status of your income from the company – is this salary or dividends or payment for your services as a consultant? If you are providing your services to the company as a self-employed consultant, then you may also be liable to register for VAT as well as teh company.

You also mention the fact that the company receives payment from a Maltese bank or a Swiss bank and may be making large payments to Israel. What are these payments for?

Finally, regardless of where the payments come from, where are the clients based? I assume Malta or where their bank is based but it does matter!

HMRC publish a very detailed guide about the subject VAT Notice 741: Place of Supply of Services http://tinyurl.com/7yrzydt. It is a long document so you may struggle if you don’t understand much about how VAT works – have a look at my short introduction to “Place of supply” https://vatexchange.co.uk/node/325.

If you think that you may need formal advice, you can get in touch with me via the contact form and we can have a conversation about how much it would cost and the information I’d need to know etc. However I’m happy to help here on the forum if you want to post more information here and I’ll do my best to point you in the right direction.

Marie

[Author]

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