Sales to US and the VAT Flat Rate Scheme

[Platypus]

You sure about that Craig? My accountant told me otherwise....

I looked into this in great detail. The rules are no quite so straightforward as "it's the US so exempt". Check out VAT Notice 741 (Place of Supply of Services) and see which bits apply to you.

In my case, my contracting services are exempt from VAT as they are supplied directly to a US company.

[blacjac]

According to HMRC’s guidance of the Flat rate Scheme:

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
HM Revenue & Customs: Flat Rate Scheme for VAT


And guidance on place of supply:

If the place of supply of your service is not in the EU, then your supply of services is outside the scope of VAT. You don't have to charge EU VAT or include the sale on your VAT Return.

HM Revenue & Customs: How to work out your place of supply of services for VAT

Maybe your accountant knows something I don't. Perhaps you're selling to a non-business customer? Not sure. I'd go back to them and clarify.

Thanks Craig, however it was definitely a business customer.

I suspect the 'place of supply' could be a bit of a grey area, however going back to my accountant on this isn't really an option (due to another thread I am not allowed to link to...) just wondering if it is another thing to add to the list of complaints I send them when I find another.....

[Craig@Clarity]

No problem

[backrubber]

Sorry Craig - didn't see your last post.

[backrubber]

Thanks for the feedback.

I'm still not sure though whether I should be including the VAT in the FRS calculation. I think it's something I'll have to look into further.

[Craig@Clarity]

This was in an email conversation I had with them back in November, about a sale I had made to a US business...

According to HMRC’s guidance of the Flat rate Scheme:

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
HM Revenue & Customs: Flat Rate Scheme for VAT


And guidance on place of supply:

If the place of supply of your service is not in the EU, then your supply of services is outside the scope of VAT. You don't have to charge EU VAT or include the sale on your VAT Return.

HM Revenue & Customs: How to work out your place of supply of services for VAT

Maybe your accountant knows something I don't. Perhaps you're selling to a non-business customer? Not sure. I'd go back to them and clarify.

[Craig@Clarity]

I recently sold to the US from a UK ltd - mistakenly charged VAT and they paid it.

What happens to this VAT collected?

If its out-of-scope of the UK then it shouldn't be handed over to VAT?

It is given back to the purchaser?

The accountant says I should pay it over to VAT....

In this case, it would appear you've overcharged your client by the VAT amount. The original invoice is incorrect so you should reissue the invoice without VAT or increase the total invoice to match the receipt (of course showing no VAT on the reissued invoice again).

[blacjac]

according to HMRC guidelines all income from trade is liable to be charged VAT on the Flat Rate Scheme

the income is included in the FRS calculations even though you don’t charge the VAT to the customer.

This was in an email conversation I had with them back in November, about a sale I had made to a US business...

[Fishface]

I recently sold to the US from a UK ltd - mistakenly charged VAT and they paid it.

What happens to this VAT collected?

If its out-of-scope of the UK then it shouldn't be handed over to VAT?

It is given back to the purchaser?

The accountant says I should pay it over to VAT....

[Craig@Clarity]

I think so. Making the assumption that the OP is dealing with other business customers then the place of supply is in the US and therefore outside the scope. What have you been told by your accountant?

There's a link all about place of supply here HM Revenue & Customs: How to work out your place of supply of services for VAT Unfortunately, it's not the most straightforward bits of VAT to deal with.

[blacjac]

You sure about that Craig? My accountant told me otherwise....

[Craig@Clarity]

The sales to the US clients would be outside the scope of VAT and therefore you don't need to include it in your FRS calculation.

[backrubber]

I sell advertising space on websites, mainly to clients based in the US. The adverts are normally for US or international companies. The revenue is paid into a PayPal account and then forwarded to my company account. My company is a UK, Vat registered company, using the VAT flat rate scheme (FRS).

Do I need to include the US advertising revenue in my VAT FRS calculation or is it outside the scope of the UK Vat system?