Charging EU VAT (and also under FRS)

[Elementaly]

Hi all,

Long time lurker, first time poster.

I'm a freelancer based in the UK with a UK based limited company and registered for VAT. I'm on the VAT Flat Rate Scheme. I provide technical consulting services on sustainability. Most of my work is analytics, e.g. Excel, data, coding.

I had originally planned to only sell in the UK but have been approached by a large company in the Netherlands, who are registered for VAT. I believe I'm correct in thinking that the place of supply is the Netherlands (I've satisfied myself that I don't sell anything that could be an 'electronically supplied service'*, but I don't think that this would affect matters anyway) - therefore, the first conclusion is that UK VAT charges do not apply.** These are outside the scope of UK VAT and therefore I don't include them on my flat rate turnover.*** (see sec 6.4).

I understand the logical conclusion of this to be that I issue an invoice with my & the customer's VAT number on it, set VAT as 0% and the customer has the reverse charging rules apply to them. Because VAT is 0%, I don't need to worry about paying VAT to my customer (and then recovering it from HMRC).**** (under section Services to EU business (VAT registered))

Is this right?

This leads to an interesting situation where I my VAT FRS bill is lowered by the fact that I'm supplying to EU based organisations, but then again I suppose I'm not getting the advantage of charging them VAT either which would normally be 'skimmed off' under FRS if I were supplying in the UK.

*https://www.gov.uk/government/public...cally-supplied

**Do I charge VAT when selling services to overseas client? | Chris Maslin's blog

***https://www.gov.uk/government/public...esses#section6

****Help. I don't understand EU VAT! - KF Accounting Services

[Chart Accountancy]

Hi

Your place of supply will be where your customer belongs, this is based on the B2B general rule for services. The digital services rules apply for B2C, I.e if your client is a private customer and not a business. If you satisfy the B2B, your place of supply will be Netherlands, so the supply is outside the scope of UK vat and excluded from your FRS turnover.

However, you will be required to file EU sales list to report your EU sales to HMRC, required for vat registered business only.You will need to obtain the VAT numbers of your customers.

Your sales invoices should have a line to say 'This supply is subject to the reverse charge rules for vat' or similar.

[TheCyclingProgrammer]

So long as you are satisfied it is a B2B supply of services then as above the place of supply will be where the customer belongs. Keep evidence that it is a B2B supply. This will usually be the customer's VAT number but they don't have to be VAT registered for the B2B rule to apply - in this case keep some alternative evidence.

You don't charge 0% VAT, you simply do not include VAT on your invoice and you would normally state that the reverse charge may apply. The customer will account for any VAT.

As you say any out of scope supplies are not included in your VAT calculations or on your return.

[Maslins]

You don't charge 0% VAT, you simply do not include VAT on your invoice

The above may sound pedantic but it's critical, especially when on FRS. Eg if you use FreeAgent, you need to ensure that you change the country drop down part of the "Contact" to be the Netherlands. That way FreeAgent should then deal with the VAT correctly (assuming you leave other settings as their default).

This is not the same as leaving the contact as in the UK and manually changing the VAT rate to 0%. Doing the latter would lead to you (incorrectly) paying over your FRS % on those sales.

[Mick dee]

Hi I know this is an old thread but I have come across a slight variation of the problem the original poster has had, I am dealing with a business outside of the eu & ec area (in this case Norway), it is a B2B arrangement (business to business) and scope of suply under VAT notice 741A lands it as Norway so they are responsible for adding and paying VAT (or Equivalent) on their side and I don't charge any VAT.

I am on the Flat Rate scheme. the problem is do I add these sales in to BOX 6 of the VAT return form? I have been told that if I was not on the Flat rate scheme yes I would but as I am on the FRS and I am not applying the FRS to these invoices that I don't record this on my Vat return...

After calling HMRC they still don't seem to know.

[TheCyclingProgrammer]

No you do not. Out of scope supplies are excluded from your flat rate turnover and should therefore be excluded from Box 6. Unlike on the standard scheme, out of scope supplies are excluded from your flat rate VAT return entirely.

[Lance]

H

I am on the Flat Rate scheme.

You probably shouldn't be.
I know that's not what you're asking, but you can have that for free. You are almost certainly losing money (unless it's your first year, or you are an exceptional case).