UK Service, EU Invoice

[Sonaso]

Hi

I Know this is very similar to Millijo’s query, so apologies for being really dense.

One of my clients is a UK based company who provide services, to one particular client, based in the UK – XXX (UK) Ltd and have to invoice direct to their HQ in Finland.

Should we be including Standard rate VAT on on our sales invoice, because of the country of supply, or should the invoices be made out as for an EU VAT registered business?

My client is VAT registered and uses Sage accounting software and their client is registerd for VAT in Finland.

Many thanks in anticipation.

Sonaso

[Marie Stein]

HI Sonaso

Thanks to your query. It sounds to me as though the supply is liable to UK VAT.

I know that people get confused about place of supply issues when invoices go to one country but the supply goes to another, so what you need to do is to establish the country in which the client belongs for VAT purposes. It is quite common within corporate groups for certain costs to be approved and paid at group management level, but that doesn’t change the place of supply for VAT purposes.

You’d have to check out the place of belonging rules in VAT notice 741a section 3, which are here: http://tinyurl.com/7yrzydt.

If your contract or engagement letter is with the UK company and services relate to the company’s activities in the UK, then it seems quite clear to me that the place of supply is the UK and VAT should be charged.

As a VAT consultant, I do tend to on the side of caution in these situations and in fact I’ve recently had a query from one of my overseas clients about the VAT liability of my own services, so I know that the issue is not straightforward. I think most accountants tend to take the position that if that client is registered for VAT in the UK and could recover the VAT as input tax on their UK VAT return, they would charge the VAT even if there was some possibility that the place of supply is outside the UK. It’s your VAT liability and you don’t want to leave yourself liable to pay VAT to HMRC that should have been charged on a VAT invoice.
Marie

[Author]

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