Q:
Dear All,
Does anyone know if Vat is applicable on inter company recharges between the UK parent company and a subsidiary in the US?
Just to confirm, inter company recharges from one EU Country to another are subject to Vat using the reverse charge rule. Is that correct?
Many thanks
Steve
A:
Hi Steve
Unfortuntately there is no simple yes or no answer as it depends what the recharges represent. Typically income from overseas associated company can represent anything such as charges for consultancy services, management advice, staff charges, directors’ costs, etc. You have to establish the actual VAT liability of each type of recharge as the mere fact that the charges are made to overseas businesses doesn’t prevent them being liable to VAT. For example, the provision of “management services” isn’t actually included in the list of services that are free from VAT so that means that the income is liable to VAT even if the recipient is an overseas business.
I’ve already posted an article here http://tinyurl.com/24pubh7 which explains the subject in more detail and should help you to decide whether or not you need to charge VAT.
The application of the reverse charge to payments to overseas companies also depends on the nature of the service that the payment represents. This subject is also covered in teh above article.
I know you were looking for a simple yes or no, but you really need to look at this in more detail. Let me know if you need any further help.
Marie