Umbrella demanding VAT for contract being worked abroad

[ASB]

You need to figure out exactly what is being supplied and then apply the place of supply rules. Depending on this the supply will fall into one of 3 categories between the umbrella and the UK agency.

1) Standard rated
2) Zero rated
3) Outside the scope

In terms of the supply the UK agency is making to the swedish company the same applies, apart from the fact that they might get a different result to the one the umbreall gets. If it is vatable then they should still NOT be charging any VAT to the end user, the end user should be self accounting for it [provided the TVA number of the customer is known, otherwise UK vat should be charged - also should be charge if the supply is not business related].

The likelyhood is that the Umbrella should charge the UK agency VAT because it is standard rated. The agency then reclaims this input vat. The agency is likely to be make a supply which is in fact outside the scope (though that depends upon exactly what services are being provided). The agency could potentially be making a zero rated supply, again depending upon the nature of the services. It is very unlikely they are making a standard rated supply.

In any event the UK agency can reclaim the input VAT, however this would be an issue if they were on the flat rate scheme (doubtful though).

This is all covered on the hmrc website in the international services document. It's only a couple of hundred pages

[ASB]

3. Agency to client.
Most likely (but not certainly) the agency are billing the client for your services in Sweden. If so, it is probably a cross-border supply of services, and so not within the scope of VAT.

It is important to check whether the specific services deemed place of supply is the UK or Sweden since this depends upon exactly what the services are. Though it is likely the place of supply is sweden (though not guaranteed even if physically performed there).

This shouldn't make much difference though, since in all cases that I can think of it would be zero rated rather than outside the scope if the place of supply was the UK. [Of course this has a big impact if on the FRS].

[Sockpuppet]

Simple.

Your Brolly Invoice agent inc VAT.

Agent reclaims VAT invoices client but doesn't include VAT if that client is VAT registed in Sweden as no vat applies.

If the client is not vat registered then they need to apply VAT on the invoice and it must be paid. Only companies that are VAT registered can have zero vat invoices if its cross border. If your not VAT registered then your invoice will have vat applied.


I reckon you'll find out that the client in non vat registered (bank) and now the agent is squealing as they don't want to up thier costs by forcing them to pay vat.

[ASB]

If the client is not vat registered then they need to apply VAT on the invoice and it must be paid. Only companies that are VAT registered can have zero vat invoices if its cross border.

I do not believe that is correct (but it could be)

http://www.hmrc.gov.uk/vat/managing/...s/services.htm

Specifically: If you are in the UK and the place of supply is in another EU country, the supply is outside the scope of UK VAT if your customer is in business.

The test is whether they are in business, not whether they are VAT registered.

Also: http://customs.hmrc.gov.uk/channelsP...346#P581_72574

Following the diagram on page 38 (assuming the services are covered by schedule 5, then this should lead to:-

"Place of supply is the EC Member State where the customer belongs. Customer accounts for any VAT."

[blacjac]

I went into this a couple of years ago when my UK based client had me work in their US office for a few weeks.

My accountant advised that I should not charge VAT for those weeks as the work was being done outside the UK, and the software was to be used outside the UK (even though billing was UK to UK). VAT applied to where the value was added (I.e. where the services were being provided and where the benefit from those services would be experienced).


So assuming UK-UK invoicing, work being done in Sweden, if the same rules still apply........

1. Develop software in Sweeden, software to be used in Sweeden - ex VAT
2. Develop software in Sweeden, software to be used in UK - inc VAT

However the rules could be different now. If I were running a ltd I would phone HMRC and explain EXACTLY what the relationship is, and ask them. They can be surprisingly helpful.

However if, like you I was working for a brolly, I would phone them up and go absolutely balistic at them for deducting it from my money, I am an employee of theirs and any VAT arguments they have with their customers is of no concern to me. I already pay them a fee out of my wages for them to handle all this.

[ASB]

I went into this a couple of years ago when my UK based client had me work in their US office for a few weeks.

US is different. The rules depend upon whether it is EU or non-EU (amongst other things).

You are right about the helpline, they do try. Thogh in my experience it's always best to ask the same question twice to see if you get the same answer! Also ask for them to put it in writing. At lest then you have a limited defence should their opinion turn out to be wrong.

However, the problem the OP may have is that they are not the vat registered entity.

[Matwilk]

Thanks to all for the feedback and info. It's a lot to take in and digest

But yes, it sounds like a call to the VAT people is required. *sigh*

Cheers,
M

[expat]

I do not believe that is correct (but it could be)

http://www.hmrc.gov.uk/vat/managing/...s/services.htm

Specifically: If you are in the UK and the place of supply is in another EU country, the supply is outside the scope of UK VAT if your customer is in business.

The test is whether they are in business, not whether they are VAT registered.

Yes, but the Swedish client has to account for Swedish VAT, and if that leads to them paying Swedish VAT that they can't reclaim, that puts up their cost and makes the agency look bad.

AIUI YMMV IANAL IANAA

[ASB]

Yes, but the Swedish client has to account for Swedish VAT, and if that leads to them paying Swedish VAT that they can't reclaim, that puts up their cost and makes the agency look bad.

AIUI YMMV IANAL IANAA

But I don't see how it make any difference. That situation occurs irrespective of whether the supplier at the bottom is vat registered and charging vat or not. The possible exception would be if the input vat from brolly to UK agency were not reclaimable.

[blacjac]

US is different. The rules depend upon whether it is EU or non-EU (amongst other things).

I suspected it might be....

Difficult situation for the OP, like I said if I was Ltd I would phone the HMRC and ask, but as a brolly employee it shouldn't be anything to do with you (IMO), it should be an argument between the brolly and the agency.....