UK limited company selling services to USA

[Nils]

I have a small UK limited company through which I sell ad spaces on websites to other companies. I have been contacted by a potential customer from the US and am wondering how selling such services outside the EU would work. They are asking me to fill in a "W-8" form for the IRS, which seems to be some sort of declaration that my company is located outside the US.

I think my company should be tax exempt in the US because it doesn't have a US presence, and I think I shouldn't have to charge VAT because the customer is a company outside the EU. Is that correct?

Is there anything else I need to take into account? There are no customs for things like this, are there?

Does anybody have experience with this?

[craigy1874]

I have a small UK limited company through which I sell ad spaces on websites to other companies. I have been contacted by a potential customer from the US and am wondering how selling such services outside the EU would work. They are asking me to fill in a "W-8" form for the IRS, which seems to be some sort of declaration that my company is located outside the US.

I think my company should be tax exempt in the US because it doesn't have a US presence, and I think I shouldn't have to charge VAT because the customer is a company outside the EU. Is that correct?

Is there anything else I need to take into account? There are no customs for things like this, are there?

Does anybody have experience with this?

What did your accountant say?

[WTFH]

If you don't currently have an accountant, you'll want one to pick this apart.

If you think HMRC are confusing, wait till you start playing with the IRS.

[Platypus]

and I think I shouldn't have to charge VAT because the customer is a company outside the EU. Is that correct?

It depends. I once read the rules very carefully. They are complex. It depends on where the 'service' (is this a service you're selling?) is delivered. If the 'service' is 'delivered' inside the EU then you need to charge VAT, but if not, then not.

How you define 'delivered' in this sense of what you're doing I couldn't guess.

Bottom line: you need to get some specialist advice, probably a VAT expert rather than your accountant.

In terms of a US presence, I'm sure you're right that you are exempt from US taxes. My situation is similar but different. I do deliver services to the US and I don't charge VAT. And I know this is OK in my case because HMRC challenged me on this recently, then upon investigation, agreed that I don't need to charge VAT.

[TheCyclingProgrammer]

The above post is incorrect re: VAT.

The general rule is that B2B services are supplied where the customer belongs. There are special rules for certain services but for most professional services including consultancy and software development the general rule applies.

This means any supply to a customer outside the U.K. will be outside the scope of U.K. VAT. The reverse charge will apply at the client end if they are in the EU VAT area and it’s normal to put a note on the invoice to this effect (I can’t remember the exact wording). In either case you don’t charge VAT.

[jamesbrown]

The above post is incorrect re: VAT.

The general rule is that B2B services are supplied where the customer belongs. There are special rules for certain services but for most professional services including consultancy and software development the general rule applies.

This means any supply to a customer outside the U.K. will be outside the scope of U.K. VAT. The reverse charge will apply at the client end if they are in the EU VAT area and it’s normal to put a note on the invoice to this effect (I can’t remember the exact wording). In either case you don’t charge VAT.

Agree with CP. The rules are not that complicated, but there are special cases, such as for digital services.

Most of my customers/clients are in the US. You won't need to charge VAT, but you will need to note on each invoice that the services are outside of the scope of UK VAT.

In terms of taxation in the US, you should not complete a personal W-8BEN, but you may be asked to complete a W-8BEN-E on behalf of YourCo. You actually need to complete very little of the form, and there should be no withholding tax. Most of my clients do not ask for this form to be completed.

In terms of other things to be aware of, the main one is insurance. Your PI insurance most likely has a policy exclusion for North America. You will need new (more expensive) PI insurance to cover this.

[Nils]

Thank you for all the replies! My accountant can probably help me with the VAT question, but they said they couldn't advise me on what to do with the W-8 or what the deal is with taxation in the US.

Does anybody have experience with filling in a W8-BEN(-E)? I found some hints online that one might have to request a tax ID number from the IRS for this, while others seem to suggest that you can just leave that field empty. Any ideas which one is correct?

I have been trying to find information on the IRS website as well, but I can barely make sense of what they are writing. Really makes you appreciate how nice and clear the gov.uk information is presented most of the time.