Q:
Hi,
I am working with an international, UK-Ltd. company that will provide an e-wallet kind of functionality to its customers (normally corporate customers), for mobile messaging services, that are paid by card, or by the cell phone bill (using “premium SMS” billing).
Our e-wallet has the role, that our customers can withdraw surplus that they have accumulated, through providing mobile messaging services through our system, at a charge, to end-users.
Our cell phone billing processing company are located outside the EU, and they send us billed money ex. VAT.
Thus for some purchases from end-customers (= adding funds to the e-wallet), we get VAT money, while for others, we do not.
Our question is this:
When we pay these out to our customer (= withdrawal from the e-wallet), how do we do this, in such a way as not to pay to them more VAT money, than we have debited end-customers of, previously?
I.e., what VAT rules / laws / principles can we rely on, in order not to do that.
I ask this, for UK companies only.
(For other EU companies, the VAT we apply on withdrawals should be 0%, to the best of my knowledge. For non-EU companies, VAT is not applicable and should thus be 0% also.)
One way in which I am clear that we could do this, is to view the service we provide as regards the e-wallet, as a money transfer service (a la moneybookers.com) – they just move the money, there are no questions about or regards to VAT involved. Though, to work as a money transfer service, I suppose we would need a special registration in this purpose with the government – so this is quite out of scope, is it not?
I look forward a lot to your expert advice and reflections,
Many thanks,
A:
Hi
Well you are right, that is a complex set of questions and unfortunately not something that I would even contemplate trying to answer here.
When people leave queries on the forum, I never provide specific answers. The forums are for general information only. I try to help by explaining how the general VAT rules apply to a particular type of situation. I’ll then provide links to the relevant guidance on the HMRC website so that the questionner can read more about the subject and work out the answer for themselves.
Your questions are about very technical areas of the VAT law and it would take me ages to even explain how the main principles work. I don’t know how familiar you are with UK VAT legislation so it would be difficult to know where to start. Also your query concerns a number of money flows and supplies of services between a number of different parties. It would take a long time to analyse the transactions for VAT purposes (I’d need to see the contracts to see how the money flows reflect the supplies for VAT purposes) and frankly I just don’t do that sort of thing free of charge!
You clearly have some knowledge of VAT and the best thing I can do is to refer you to the HMRC Notice which deals with international telecommunications services, which is here on the HMRC website: http://tinyurl.com/387l5gk. As you will see, it is called “The Place of Supply of Services” (VAT Notice 741A) and explains in detail how these complex rules apply to all types of international services. It is not an easy subject and you really need to read through the first few sections of the Notice to understand teh terminology and the concepts involved. It is essential to understand the basic concepts so that you can follow the guidance about specific types of supply.
A special rule applies to certain telecommunications supplies called the “Use and Enjoyment Rule”. This ensures that VAT is collected on the supply of telecommunications services by non-EU suppliers to EU customers, according to where the service is “used” or “enjoyed”. See Section 15.10 of the notice onwards and particularly section 16 for a detailed explanation of this.
I would of course be willing to provide further advice through my formal consultancy service – see my contact details on the left hand menu if you would like to discuss this in further detail. Otherwise I hope you can find the information you need in the HMRC Notice.
Marie