VAT FRS Clarification

[downsouth]

I guess it's worth pointing out that you don't have to include EU or international supplies in your FRS turnover if they fall outside the scope of UK VAT which I would have thought would be the case for a lot of the contractors on here (and certainly, it is now the general rule that services supplied to the EU or outside the UK are outside the scope of UK VAT).

Where did this advice come from?
An official source?

Gladly show this to my accountant

[TheCyclingProgrammer]

Where did this advice come from?
An official source?

Gladly show this to my accountant

It's up to you to put all of the pieces together and make sure they fit your situation, but the pieces, as the are...from the same HMRC source referenced earlier regarding EU supplies:

HM Revenue & Customs: Flat Rate Scheme for VAT

Don't include:
services you've purchased from outside the UK that you've had to reverse charge
disbursements - costs you pass on to your clients that meet the necessary VAT conditions
private income, for example income from shares
the proceeds from the sale of goods you own but which have not been used in your business
any sales of gold that are covered by the VAT Act, Section 55 - see the link below
non-business income and any supplies outside the scope of UK VAT
sales of capital expenditure goods on which you have claimed back the VAT you paid

Important not to confuse zero-rated or exempt supplies with out of scope supplies; zero-rated and exempt still form part of your flat-rate turnover and if the majority of your supplies are zero-rated or exempt (I doubt that is the case for most here) then you are best off out of the FRS.

As to whether your supplies are out of the scope of UK VAT...this is where it gets a bit trickier.

The general rule for services is now:

If you are in the UK and the place of supply of your service is in the UK, you charge and account for VAT according to UK VAT rules.

If you are in the UK and the place of supply of your service is in another EU country, the supply is outside the scope of UK VAT. However, for some supplies, you may need to register and account for local VAT in the country of supply. You will need to check with the tax authority in that country to find out how to treat the services you are supplying.

Certain services have their own special rules and you will need to consult the VAT place of supply of services guide for this, but electronically-supplied services (which IMO most software development and consultancy falls under) is from the UK to the EU (B2B, not B2C) is outside the scope of UK VAT.

Lots of information on this here: HM Revenue & Customs: How to work out your place of supply of services for VAT