VAT Determination

[Yuri F]

VAT is governed by place of supply rules. The general rule for B2B supplies is that tax is due where the business customer belongs, so if the business customer belongs in the UK, then VAT is due...

Thank you very much, I thought the same way conceptually but lack of legal/tax expertise wouldn't allow me to put it in such smart wording way.
Although I've already pulled the plug on this contract on a basis of questionable VAT determination - they keep ringing me (thins morning, another contact agreed for a next week) trying to convince it's all good but I couldn't find the right sounding basis to stop it with correct justification.

[jamesbrown]

VAT is governed by place of supply rules. The general rule for B2B supplies is that tax is due where the business customer belongs, so if the business customer belongs in the UK, then VAT is due. If the business to which you are supplying your services has several establishments and you are delivering your services at the UK establishment, then the place of supply will most likely be the UK establishment and VAT will be due. The main situation where uncertainty arises is when the ultimate customer of your services (the business that benefits directly from their supply) is based overseas, but you are administering the project through a UK branch, in which case the place of supply could be overseas. For example, let's say you are administratively dealing with a UK branch of GibberishInternational, but developing some factory pipeline software that will be used exclusively at the overseas factory of GibberishInternational GmBH. You are nowhere near that scenario.

Bottom line, I wouldn't go near this situation because the business customer almost certainly belongs in the UK, based on the VAT place of supply rules, and you should be charging VAT.

As an aside, the reverse charge applies where the supply is made in the UK and the supplier is based overseas. Supplies made by a UK business to an overseas business (where the place of supply is overseas) are outside of the scope of UK VAT, in which case there is no VAT accounting whatsoever.

[Yuri F]

Hello,
I've a strange case with one of possible contracts. therefore running some sanity checks/due-diligence.

let's say:
1) I'm contractor with MyContract-%^&-LTD - which is UK-registered (incl. VAT)
2) Agent is say CambridgeInc455 - Denmark-registered.
3) End-client GibberishInsurance4532 with physical presence (Bank Station) and registration in UK (Companies House, VAT)
4) GibberishInsurance4532 has an umbrella called GibberishInternational01100 based in Germany (EU)

I provide services (not VAT exempt type) directly in UK offices of GibberishInsurance4532
(so both me and end-client in UK, therefore should be subject of VAT from HMRC perspective)
CambridgeInc455 autogenerates my invoice (without VAT due to UK/EU reverse charge),
receives a payment from GibberishInternational01100
and pays to me (without VAT of course).

On a paper-trail it seems clean (contract is with Denmark company and specifies German company as end client)
In reality (which in a way differs from what's on a paper) - UK-VAT company provides services to UK-VAT company (but without VAT charged on invoice despite not being exempt)
Does this represent tax avoidance/evasion scheme with recommendation not to sign such contract terms? (from a governance/integrity/ethics/etc. perspectives)
I understand what on a paper it's clean (because it has only partial endpoints distributed internationally, therefore is missing the links), thus in practice probably 99% are getting away with this. Also aware what how fraud is defined and what it's criminal.
But how it's in reality? (Ltd governance principles: transparency, risk, accountability, fairness). Are these schemes a common thing? Or something to stay away from?

Had a clients previously who were physically and legally/tax-based in EU (with me working remotely from UK-Ltd).
But this chained approach looks a bit dodgy, so trying to figure out if I'm not freaking out of nothing due paranoia for compliance.

Thank you.