On flat rate VAT scheme but have to invoice EU company (Dublin) - told I'm liable?

[Greg@CapitalCity]

This seems wrong! Very wrong,

It is. Your supplies are outside of the scope of VAT (which is why you don't charge VAT in the first place), and as such they do not appear on your VAT return.

[PastaBlasta]

Hey brilliant, MUCH appreciated! Thanks very much for this.

PB.

[ASB]

Hi there, I'm a UK contractor and I've taken a contract in London direct to the client so there is no agency in the middle. Work will be done at the client's site and in my own office, both in London.

Now the client's company is Dublin based and I'll be invoicing them for payment. Both the client and my accountant say the invoice should not include VAT as there's some EU rule to stop carousel fraud.

The problem is, my accountant says that as I'm on the flat rate VAT scheme I'll still have to declare the income and pay the "flat rate" 14%(?) even though I cannot charge the client VAT. So basically I'm either losing money or telling the client I've got to charge more - very professional. not.

This seems wrong! Very wrong, but my accountant is adamant this is the rule.

Does anyone have experience of this? Can anyone suggest a 100% legal way around it? Coming off the flat rate scheme is possible, but under revenue rules I can't go back on it for 12 months.

Thanks for any assistance,

PB.

It is a bit of a minefield.

Firstly you almost certainly should NOT be charging VAT (as you are aware); however there are some situations where you should be - though it is very unlikely that you will be.

As to the flat rate scheme the question is simple: "Is the invoice included in your turnover for purposes of the flat rate scheme?". If the answer is yes then you lose out. If the answer is no you don't.

If you check here:

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

Highlighting the relevant bit:

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.

It is likely therefore that the supply you are making is outside the scope of UK vat.

Now, if you look at the FRS rules:

HM Revenue & Customs: Flat Rate Scheme: how to complete your VAT Return box-by-box

Again highlighting the relevant bit.

You must exclude from your flat rate turnover:
private income
sale proceeds from goods you own but which haven't been used in your business
any sales of gold covered by the VAT Act
non-business income and supplies outside the scope of VAT
sales of capital expenditure goods where you've reclaimed the VAT on their purchase

So, although you are not charging VAT you are also not including it in your flat rate turnover.

I wouldn't be critical of your accountant, though highlighting the above for his opinion might prove useful. It is exactly this reason why when I was trading I never joined the FRS. I was unable to get confirmation from the VAT helpline as to the position. You can always try ringing them, point out the above, and ask for their written opinion. Then do it again because you'll probably get a different answer.

Of course IANAA.

[PastaBlasta]

Hi there, I'm a UK contractor and I've taken a contract in London direct to the client so there is no agency in the middle. Work will be done at the client's site and in my own office, both in London.

Now the client's company is Dublin based and I'll be invoicing them for payment. Both the client and my accountant say the invoice should not include VAT as there's some EU rule to stop carousel fraud.

The problem is, my accountant says that as I'm on the flat rate VAT scheme I'll still have to declare the income and pay the "flat rate" 14%(?) even though I cannot charge the client VAT. So basically I'm either losing money or telling the client I've got to charge more - very professional. not.

This seems wrong! Very wrong, but my accountant is adamant this is the rule.

Does anyone have experience of this? Can anyone suggest a 100% legal way around it? Coming off the flat rate scheme is possible, but under revenue rules I can't go back on it for 12 months.

Thanks for any assistance,

PB.