Originally posted by TheCyclingProgrammer
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Reverse VAT confusion
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Originally posted by cannon999 View Post
My offshore supplier does not charge me any VAT or VAT-like tax (they are not in EU). So there is no tax to account for - the only VAT in question here is the tax I have collected from my client. That is just straight up paid back to the tax man at the end of the quater, no?Comment
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I have to say, it is a rather peculiar rule. The overseas supplier isn't registered for VAT in the country of origin but the UK purchaser has to do a in-out transaction that looks like a fudge to 'account' for something they haven't incurred.
I'm sure some real ale drinking, sandal wearing tax specialist gets it but I certainly don't.Comment
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TheCyclingProgrammer's got it spot on.
As for the "why"...part of it may well be that bureaucrats like to make life difficult, and yes it may seem daft that effectively you pretend you were charged UK VAT then pretend to reclaim it...but there are some situations where it makes sense.
Eg UK businesses either not VAT registered at all, or registered but on the flat rate scheme. For them, EU suppliers could otherwise be a sneaky way to manipulate VAT in the supply chain. Combination of place of supply rules treating non VAT registered business simply as consumers (rather than as businesses), and the reverse charge, help prevent VAT being circumvented.Comment
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The accountant has changed the story now. Now 'Reverse charge VAT only need to be done if the subcontractor is performing specific types of work. Based on your work being IT consultancy reverse charge VAT would not apply.'
Who do I believe?Comment
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I'd follow the latest advice from a qualified professional (keep the correspondence) and leave it off.Comment
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Originally posted by cannon999 View PostThe accountant has changed the story now. Now 'Reverse charge VAT only need to be done if the subcontractor is performing specific types of work. Based on your work being IT consultancy reverse charge VAT would not apply.'
Who do I believe?Public Service Posting by the BBC - Bloggs Bulls**t Corp.
Officially CUK certified - Thick as f**k.Comment
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Originally posted by cannon999 View PostThe accountant has changed the story now. Now 'Reverse charge VAT only need to be done if the subcontractor is performing specific types of work. Based on your work being IT consultancy reverse charge VAT would not apply.'
Who do I believe?
There are exceptions to the general rule but none that I know of that would apply to general IT consultancy services.
See:
https://www.gov.uk/vat-on-services-from-abroad
What I suspect is happening here is that you're not communicating to your accountant properly or there is a misunderstanding somewhere. Send the above link to your accountant and ask them to explain why that does not apply in this situation and see what they say.
Not all accountants are VAT experts, I should add. As I mentioned before, there are other types of "reverse charge". Are you sure they aren't getting confused with the domestic reverse charge on building sub-contractors? (https://www.gov.uk/guidance/vat-dome...ion-services)Last edited by TheCyclingProgrammer; 6 October 2021, 11:45.Comment
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