Reply to: UK Contractor working with a US agency on a UK based assignment - advice needed

[jamesbrown]

Thanks for a great answer. I believe this is the correct answer having spoken to a VAT consultancy.

This is a truly wonderful forum and you were all of such great help. Thank you!

Glad you found the correct answer from speaking to a consultant, and sorry to hear that the VAT helpline didn't help much in this instance I must say, that isn't my experience of the helpline, but I guess it depends on who you talk to. It's also worth remembering that, while the general rule for B2B supplies of services to clients based outside the UK and EC appears to be straightforward (as paraphrased in several posts above), it's not always straightforward to determine whether that rule applies or one of the many special rules applies, which depend on the precise nature of the services being supplied (and sometimes even what constitutes a category of service, such as electronically supplied services, for example). Thus, it is always worth seeking expert opinion on this.

[Vishy]

You are invoicing the US business (not the US business' UK client or US business' UK branch). Consequently as the customer (the US business) is outside the UK the supply is outside the scope of UK and EC VAT. Therefore no VAT is chargeable.

If you invoiced the UK client directly VAT would obviously apply as the customer is in the UK.

If your work directly relates to US business' UK branch then UK VAT would apply due to the place of belonging rules (these rules kick in as there are multiple establishments); see section 3.6.1 of link:
HM Revenue & Customs

Thanks for a great answer. I believe this is the correct answer having spoken to a VAT consultancy.

This is a truly wonderful forum and you were all of such great help. Thank you!

[JB3000]

Once again, thanks to everyone for the answers to my questions. Your help is proving invaluable.

I called the VAT helpline and, honestly speaking, it was fairly helpful but I didn't feel confident with the woman's answer. At first she was insisting that I charge 0% VAT on exported goods, but I kept trying to explain to her that I am not exporting goods, but that I am delivering services to a US-based company, who have contracted me to work with their US client who have a UK based office, where I will situated and doing consulting work across Europe and America for them.

In the end, she just told me to consult Notice 741A on the HMRC site (HM Revenue & Customs), which was not particularly helpful.

I have dealt directly with US customers before and my Accountant advise me to not charge VAT, and to state on the invoice that "this invoice may be subject to a reverse charge for VAT purposes." Difference is this time, my US customer has me working onsite for one of their customers' UK office (but the work I do for them is not constrained just to the UK). Too confused!

You are invoicing the US business (not the US business' UK client or US business' UK branch). Consequently as the customer (the US business) is outside the UK the supply is outside the scope of UK and EC VAT. Therefore no VAT is chargeable.

If you invoiced the UK client directly VAT would obviously apply as the customer is in the UK.

If your work directly relates to US business' UK branch then UK VAT would apply due to the place of belonging rules (these rules kick in as there are multiple establishments); see section 3.6.1 of link:
HM Revenue & Customs

[TheCyclingProgrammer]

Bit of extra info in the above post that could be crucial.

There aren't "use and enjoyment" provisions for professional services, that's usually for things like software and digital goods.

There is a provision mentioned above for overseas clients with a UK establishment which is why it seemed like VAT might be chargeable.

However, you just said that you will be working for your US client's UK based client. I assumed you meant your US client had a London office. If this isn't a case then it doesn't sound like your US client has a UK base at all in which case the usual advice that the supply is outside the scope of UK VAT is probably the correct one.

If still be inclined to get a second opinion from your accountant and maybe the VAT helpline again though.

[Vishy]

Worth asking your accountant too. When I phoned HMRC about a VAT question with respect to working for a client in Greece the answer they gave me was wrong and would have cost me £4,000 if I'd done what they'd said. My accountant had a better understanding and offered accurate advice.

Once again, thanks to everyone for the answers to my questions. Your help is proving invaluable.

I called the VAT helpline and, honestly speaking, it was fairly helpful but I didn't feel confident with the woman's answer. At first she was insisting that I charge 0% VAT on exported goods, but I kept trying to explain to her that I am not exporting goods, but that I am delivering services to a US-based company, who have contracted me to work with their US client who have a UK based office, where I will situated and doing consulting work across Europe and America for them.

In the end, she just told me to consult Notice 741A on the HMRC site (HM Revenue & Customs), which was not particularly helpful.

I have dealt directly with US customers before and my Accountant advise me to not charge VAT, and to state on the invoice that "this invoice may be subject to a reverse charge for VAT purposes." Difference is this time, my US customer has me working onsite for one of their customers' UK office (but the work I do for them is not constrained just to the UK). Too confused!

[javadude]

You can call the VAT helpline, as they are typically very helpful. See here also (notably line 5 in the table).

Worth asking your accountant too. When I phoned HMRC about a VAT question with respect to working for a client in Greece the answer they gave me was wrong and would have cost me £4,000 if I'd done what they'd said. My accountant had a better understanding and offered accurate advice.

[jamesbrown]

See the link I posted above. The place of supply rules can be complicated (with various special rules), but the OP indicates that the services will be enjoyed in the UK, in which case the place of supply will most likely be the UK. Staff on the VAT helpline are well-informed in my experience.

[TheFaQQer]

If you read towards the end of the thread you'll see that it's very possible that UK VAT is still chargeable if the US client has a UK establishment and the work is performed at that establishment, regardless of the contractual position.

So probably best to speak to the VAT helpline on this one.

I'd missed the part in the original post about being in the City. If that's the case, then I think VAT would be charged.

[TheCyclingProgrammer]

This was discussed in this thread earlier this year:



HTH

If you read towards the end of the thread you'll see that it's very possible that UK VAT is still chargeable if the US client has a UK establishment and the work is performed at that establishment, regardless of the contractual position.

So probably best to speak to the VAT helpline on this one.

[TheFaQQer]

So I will be invoicing the US firm who provide the contractor (me) to the US company with an office in the UK. As I will be working onsite in the UK, would it be deemed that the service is delivered in the UK? Can a US company reclaim UK VAT charged to them?

This was discussed in this thread earlier this year:

As it is services being provided, the place of supply will be the country that the customer is based, irrespective of the physical location that the work is carried out. Therefore if you will be sending your invoice to somewhere outside the UK then you will not need to charge VAT.

As the supply will be outside the scope of UK VAT you will not charge VAT on the invoice, and you will not pay it over to HMRC either.

HTH

[jamesbrown]

Thanks for your help and advice so far peeps. I am taking your opinions and advice on board and following up with the US agency to try and get amendments to the contract.

One interesting point raised was the charging of VAT, which I hadn't even thought of.

So I will be invoicing the US firm who provide the contractor (me) to the US company with an office in the UK. As I will be working onsite in the UK, would it be deemed that the service is delivered in the UK? Can a US company reclaim UK VAT charged to them?

You can call the VAT helpline, as they are typically very helpful. See here also (notably line 5 in the table).

[Vishy]

Thanks for your help and advice so far peeps. I am taking your opinions and advice on board and following up with the US agency to try and get amendments to the contract.

One interesting point raised was the charging of VAT, which I hadn't even thought of.

So I will be invoicing the US firm who provide the contractor (me) to the US company with an office in the UK. As I will be working onsite in the UK, would it be deemed that the service is delivered in the UK? Can a US company reclaim UK VAT charged to them?

[BlasterBates]

The key problem with this contract is sorting out any dispute. Basically you won't be able to. You would need to add in a risk of a month's unpaid invoice. Perhaps you could get them to pay weekly.

[jamesbrown]

You'd be better off all around by trying to work this via a UK agency. I have a few US clients (working direct), and there are some hurdles to jump through w/r to insurance (you need specialist PI insurance that covers US jurisdiction and governing law) and US contracts are generally pretty verbose, so you need to have them reviewed carefully for T&C.

FWIW, there is a difference, in principle, between the jurisdiction and governing law associated with a contract. The jurisdiction determines where a dispute is heard. The governing law determines the legal system applied. In all likelihood, Ohio is specified for both, but this is relevant for insurance purposes. There are no material reasons why you cannot work with US clients, but given that your work will be UK based (which means that you will likely be required to charge VAT based on the place of supply rules), you may have some headaches with this particular situation.

Also, you need to separate between your obligations under this contract and your relationship with YourCo. You are still the director of (and an employee of) YourCo here in the UK.

[SueEllen]

If there is a dispute you would have to go to the Ohio courts to sort it out.

If you can afford to do that take the contract. If not pass.