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Hi Carol
There are a lot of technical issues involved here and although you’ve clearly read up on the subject, I think that there are some points I need to emphasise.
First of all, bear in mind that the guidance given in VAT Notice 741a is HMRC’s interpretation of the EC Directive and how it applies in the UK. The French may have a different interpretation of how remediation of contaminated land should be treated for VAT purposes.
Second, for VAT purposes I don’t think that there are any situations where the place of supply in this case would be the US.
From past experience, I would say that the French follow the Directives quite literally (not surprising as they were originally drafted in French!) and that they would take the view that the place of supply is France.
Please also bear in mind that there are 2 separate issues – the place of supply is where the supply is deemed to take place. This is different to “who accounts for the VAT” – i.e. whether the supplier is required to register for VAT in the country where the supply is deemed to take place and charge VAT to the customer; or whether the customer can account for reverse charge VAT.
What this means is that if the supplier of the services is not “established” in France, then the customer would account for VAT using the reverse charge procedure AS LONG AS THE CUSTOMER IS REGISTERED FOR VAT IN FRANCE. I can’ t be absolutely certain, but if you ask the French customer if they believe that they can account for reverse charge VAT, this should help guide you in the right direction. Of course, that’s no guarantee that they have it correct – I’d still recommend getting confirmation from the French tax authorities to be certain that the US company isn’t required to register for VAT in France.
Furthermore, the use of a UK subcontractor would also make things more difficult. I assume that the UK sub would invoice the US main contractor, who would invoice the French customer. That makes things difficult because the UK sub would, in principle, have to register for VAT in France and charge French VAT to the US company because the reverse charge can only be used if the customer is registered for VAT in France. You also mention the fact that there could be some agency arrangements involved – presumably the UK sub would be acting in the name of the US company, so that complicates things even further.
Dealing with the French tax authorities isn’t always easy – not only is there the language barrier but also the practical side of things as their way is different to ours. So you really need local advice.
I’d be happy to have a no-obligation chat with you about this if you’d like to send me your contact details even if just to help you clarify the main issues. I’m the first to admit that I couldn’t give formal advice on non-UK VAT issues. Plus if there are agent arrangements involved, you might want to consider taking advice from a French solicitor who has knowledge about the French tax rules to make sure that you’ve got the tax arrangements correct.
Marie
Hi Carol
Good question and I’m going to have to check out a couple of things before answering – hopefully this week – but you don’t way what sort of work is involved?
As you say “project site” am I right in assuming that you mean property construction? If not, what is it? It’s important as it may determine whether or not either UK or US company has to register for VAT in France rather than use the reverse charge rule.
Also, please bear in mind that although all EC member states operate within the same EC Directives for VAT purposes, each country operates the rules in their own way. In some countries, the tax authorities will allow more or less all imported services to be accounted for using the reverse charge, while other countries require the overseas suppliers of certain services to register. This would generally always apply if the customer is not registered for VAT in teh country in which the supplies are received. I’m not certain how the French apply these rules but I can have an initial look, once I know for certain the natuer of the contract involved here.
Assuming it’s property construction, then the place of supply would be where the work is carried out, i.e. France. The French rules may allow the French customer to account for VAT under the reverse charge on the charge from the US contractor. However it’s possible that the UK company may be required to register for VAT in France as its’ supply is being made to the US company and the reverse charge can normally only be used by businesses who are registered for VAT in an EC member state.
There are other aspects to consider as well – for example it may be more practical for the US to register for VAT in France in order to speed up recovery of French VAT.
If you can clarify the nature of the contract, I’ll be happy to give this some further thought and point you in the direction of the French guidance on teh subject.
Marie
Hi Jimbob
I’m sorry to hear about your situation and I can appreciate how anxious you and your wife must be about all of this.
Unfortunately I think that the answer to all 3 of your questions is no. The ESC3.4 which you mention only applies to situations where liability issues are not covered in HMRC’s guidance and your situation – which I suspect is based on the presumption by HMRC that the supplies of the meal packs and advice constitute a single supply of dietary services (or something similar – obviously I’ve not seen the HMRC letter) and this issue – i.e. the liability of food and the treatment of “mixed” or “composite” supplies are both covered in some detail in their notices. See VAT Notice 700 The VAT Guide section 8 for general information http://tinyurl.com/d64t8jr. There is more detailed guidance about specific industry issues in other notices.
Also, HMRC are not required to notify any business that they are looking into their affairs, nor is there any legislation that prevents them pursuing VAT debts on the basis that the debts are “disproportionate”.
However, I’m not certain that their ruling that the supplies are standard rated is correct and I think that it is worth challenging it. It’s difficult to give a concise summary of the reasoning as it’s based on a lot of legislation and caselaw. But it sounds as though they are saying that the whole supply of the food packs and advice is a single supply and they believe that the predominant element is the advisory services is standard rated, therefore the whole supply is standard rated.
At this stage, I don’t know whether they are correct or not. I’ve dealt with many such situations over the years and each one is decided on its facts. There are dozens of VAT tribunal cases on the subject and some have even gone as far as the European Court of Justice.
There are a number of factors that I think might work in your favour, but what I can’t do here is to provide any helpful guidance on your specific situation. I would, of course be happy to advise through my consultancy services, but before committing yourself to this, I’d be happy to have a look at the HMRC letter and have a discussion on no-obligation basis to help you decide how to proceed. At least then you’d have a better idea of the issues involved and the likelihood of getting the ruling overturned and can make a more informed decision.
If you’d like me to look at the correspondence, please email it to me at the contact address and then we can arrange a time to discuss.
Marie
Hi Samjay
If the publishers register for VAT, they’d have to pay VAT on their UK sales as well as recovering VAT on their income. If they are selling to Amazon in the UK as principal, which I imagine is the normal practice, then they could charge VAT to Amazon who would recover it as input tax.I assume that we’re talking about Amazon UK, as the rules may be different if publishers are selling to overseas Amazon companies.
I’m not aware of any specific guidance on the VAT liability of ebooks . The VAT treatment depends on the contractual nature of the transactions and I haven’t seen anything that suggests that Amazon acts as an agent in the sale of ebooks, but I don’t know for certain as I’m not advising them!
But I’m sure that you’re aware that the zero-rate only applies to the sale of printed books, as explained in HMRC’s VAT Notice 701/10 Zero-rating of books etc http://tinyurl.com/8sr4y. This means that VAT applies to ebooks in the same way as any other electronically supplied services, such as downloaded software, film, music etc.
In any case, even if the publisher isn’t registered for VAT, Amazon has to charge VAT on the sales of ebooks that it makes as principal and I suspect that applies to most if not all of their sales.
Hope this helps but let me know if you have any more specific queries.
MarieHi Karen
Apologies for the delay in replying – I’m just getting up to date after cleaning the site up after the spammers plus the holidays.
I assume that the reason for the query is because the dentist won’t be able to recover any VAT charged? I suppose that it would be possible to transfer the building into a new company, but there may be a VAT charge on the transfer to the company, plus you’d have to consider whether the new company would inherit the existing owners’ VAT liability – eg capital goods scheme adjustments etc.
Unfortunately it really isn’t possible to give general planning tips on such issues. Property transactions are among the most complex and require detailed knowledge of the parties involved, the VAT history of the property and the intentions of the purchasers. The intention of the VAT legislation is to ensure that exempt businesses such as dentists can’t recover input VAT, so trying to get around this is difficult and certain practices can be regarded as avoidance and must be notified to HMRC.
I’d be happy to have a no-obligation discussion with you about this to see it there is anything that could help. If you’re interested, send me your contact details and a bit more information about the property to enquiries@vatexchange.co.uk and I’ll give you a call.
Marie
Hello David
My apologies for the delay in responding. The website was “spammed” quite regularly over recent weeks and with the Christmas holidays, I’ve just managed to get it sorted out.
It seems as though your query falls within the “place of supply” provision because it relates to services supplied to overseas business. I’ve explained the rule briefly here https://vatexchange.co.uk/node/325.
Normally, services supplied to overseas businesses are outside the scope of UK VAT, but if your service relates to land and property in the UK, it would fall outside the normal rule and be liable to UK VAT. This is explained in VAT Notice 741a, Place of Supply of Services, section 6 http://tinyurl.com/6loq2h4.If the Czech developer is providing services relating to land or property in the UK, then it may be liable to register for VAT in the UK, so would be able to recover the VAT charged on its UK VAT returns. Otherwise it may be entitled to recover the VAT through the EC VAT Refund scheme.
As the supplies are made within the UK and therefore probably liable to UK VAT, you don’t have to complete an EC Sales list for them.
Marie
Hi Simon
My apologies for the delay in responding. You might have noticed that the website has been “spammed” quite regularly over recent weeks and with the Christmas holidays, I’ve just managed to get it sorted out.
Unfortunately I can’t really help you with this query as you haven’t given me enough information to even try to point you in the right direction. The most important fact that I need is the nature of the that your company provides to its customers as it is this that will decide on the VAT liability and whether or not the UK entity could recover VAT charged by the Turkish entity.Plus the VAT treatment would differ according to whether the charges are “inter-company” or between separate companies in each country. The key technical issue is the “place of supply” rules, which are many and complicated. I’ve posted a short explanation of the rule here https://vatexchange.co.uk/node/325 with a link to the HMRC VAT Notice 741a which explains how the rules work in detail and you may be able to work out the answer yourself
This is the sort of issue that would probably require some formal, detailed advice and I’d be happy to help through my consultancy services if you want to send me an email to enquiries@vatexchange.co.uk . But if you’d like to post a bit more information here on the forum, I can give you a few general pointers.
Marie
Hi NK
First of all, apologies for the delay in responding. You might have noticed that the website has been “spammed” quite regularly over recent weeks and with the Christmas holidays, I’ve just managed to get it sorted out.
I hope by now that you’ve heard from HMRC and that you don’t have any VAT to pay as it sounded as though your supplies were outside the scope of UK VAT. However, in the event that there is VAT to pay, HMRC can levy penalties of up to 15% of the underdeclared VAT – see section 3 of VAT Notice 700/41: Late Registration Penalty http://tinyurl.com/78zo632.Even if HMRC levy a penalty you can appeal if you think you have a reasonable excuse, as explained in the notice. But I hope it doesn’t come to that!
Belated Happy New Year!
Marie
Hi NK
First of all I’d suggest that you don’t worry about it too much. It’s not even clear to me from your post whether or not the services you were providing were liable to UK VAT and if the VAT demand is based on their estimate from other information (eg your UK tax return) then it could be completely wrong.
Write to them to lodge a late appeal against teh assessment pending their review of your case. You don’t need to go into any detail with the appeal, all you need to do is to lodge an appeal in writing on the basis that the assessment is incorrect. I’d be surprised if they won’t accept the appeal even though more than 30 days have passed.
Strictly speaking you are supposed to pay the assessed VAT while they are considering the appeal but I assume that you don’t have any assets in the UK anyway so they can’t exactly chase you for the debt at the moment! The most important thing is to correspond with them and you’ve already started that process. Just make sure that you lodge a request for an appeal – just a letter, nothing special – as this has to be done in order to have the assessment formally withdrawn if they agree that the assessment is wrong.
Hope it all works out okay, but let me know if you need any more info.
MarieHi Bakerwe3
It’s a bit of a big subject really but in principle, the provision of health services provided by NHS hospitals is exempt from VAT. This means that VAT isn’t charged on any “income” but the NHS can’t recover any VAT on its costs. You can get more information from HMRC’s VAT Notice 701/31: Health Institutions http://tinyurl.com/cadkjrb.
The exemption is laid down in the EC VAT Directive so similar provisions apply in other EC countries.
Marie
Hi Michelle
Yes, I’d agree that the employee portion is recoverable as their expenditure would be regarded as subsistence. The interviewee is regarded as a third party so any VAT on that part of the cost can’t be claimed.
Marie
Unfortunately I’m not sure I understand the question. I need more information in order to point you in the right direction.
You say that you “credit customers for warranty” – what does this mean? Do you mean that you’re crediting customers for the value of goods returned or do you give customers refunds under some sort of insurance based warranty?
The EC sales list and the Intrastat don’t always match because the sales list is for sales while the Intrastat is for the movement of goods, but I can’t tell from the information you’ve provided how this would be affected by your warranty credits.
If you can give me some further information I’ll try to help.
MarieHi Lawlrec
Thanks to your query. I know that agency/commissions is a messy area of VAT and it’s something that I think a lot of people get confused about.
The reason is simply because of the use of the terminology. The word “agent” is sometimes used to describe a vendor whose profit is calculated by reference to sales made, so that their income is made up entirely of commission, but never actually take title to the goods or services involved. But often, when you look at the contract, it’s not a true agency situation but simply that the original supplier of the goods may wish to retain title to the goods until they are eventually sold or sales are made to order. In that situation, the original vendor may refer to the profit as “commission” because the intermediate vendor (i.e.you) only gets their share of the sales proceeds as and when they sell to a third party.
And the issue is sometimes even more complicated because in a lot of service-based industries, such as employment agencies, the “agent” is clearly acting as a principal.
In most cases, it comes down to the issue of whether or not you take ownership to the goods at any point in the transaction, or how you treat them for accounts or legal purposes. For example, if the customer has a problem with the goods, who is legally responsible for sorting out the problem? These are the sorts of issues that you need to consider when trying to establish whether or not your income for VAT purposes should be the value of the goods sold or the value of your commission. The VAT liability of the sales of the goods or the commission would depend on the place of supply of those goods/services themselves and would have to be considered in their own account.
I’m sorry I can’t be of more help, but I think that any VAT adviser would tell you that there’s no one defining factor that can establish whether or not you’re selling the goods as agent or principle for VAT purposes. I’d be happy to help through my consulting services and I do offer lower rates for small businesses, so please feel free to drop me an e-mail or call me to have an initial discussion (free and no obligation!) if that would help.
Finally, I should admit that I don’t speak the “accounting language” myself! As a VAT consultant, my second language is, unfortunately, “VAT speak” and there are very few people in the world who like to admit to this.
MarieHello Exclaret
Thank you for your query. Unfortunately, I can’t really give any helpful advice here because there are several factors that could affect the VAT position. In certain circumstances, it may be possible to purchase the property free from VAT if the car park business will be carried on as a going concern, but only apply if the purchaser is registered for VAT.
I’d be happy to help on a formal basis if you’d like to drop me an email using the contact form, but either way I’d strongly recommend that you take advice well before the auction date because if you wish to purchase the property free from VAT as a going concern, you would need to ensure that you are registered for VAT with effect from the date of purchase. Furthermore, stamp duty land tax is usually charged on the VAT inclusive price of any such property so the addition of VAT to the purchase price would increase the amount of the stand duty land tax itself.
As you are doubtless aware, VAT and property is one of the most complex areas of the legislation. I never give definitive advice relating to any issue here on the forum and when the query relates to specific property transactions I am reluctant even to give general guidance because there are so many factors that can affect the issue.
Marie