VAT & Offshore Businesses VAT & Offshore Businesses
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  1. #1

    Nervous Newbie


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    Default VAT & Offshore Businesses

    Hi. I posted this in a specific thread on Gibraltar but frankly, it's probably wider.

    So I'm totally new to running my own business and VAT and wanting to learn more about this (from an educational point of view). I've worked in SEO for a long time (as a self-employed person) but making a foray into my own business. A lot of my clients/customers are in non VAT counties outside of EU rules (Channel Islands and San Marino specifically). The services from my end are usually consultation for configuring Google products, and buying of advertising services from the likes of Twitter, Google and Facebook (usually Ireland invoicing companies).

    Obviously, I'm not looking at any illegality but want to understand about the practical implications of these sorts of setups for both me and potential clients in future. Assume the status quo re: Brexit.

    If I was to move to Jersey (or others like Gibraltar) and incorporate/run my new business from there, I would not charge VAT on my services - and there would be no issues for clients in these territories as no vat charges would be levied at either end? Right?

    But if I then take on EU based clients (currently the UK), would my setup be a benefit or detriment to them? If I supplied from my home office in Jersey SEO services to a UK client, would I add VAT on my invoice? Assume not as I'm based in a non-VAT territory? Right? But my questions then become:

    1. Would they have to account for VAT (either make a payment or alternatively earn a tax credit) for VAT on their end? The benefit/cost question.
    2. Does the fact I'm providing digital advertising services change anything?


    Thank you

  2. #2

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    Default

    Hello. I’m not sure about the specifics about VAT in Gibraltar but you would need to comply with VAT rules where you are providing the service. VAT is a little complex, if you are providing services to VAT registered businesses then VAT will not impact them because they will be able to claim it back. Often companies can reclaim international VAT or have it zero rated if they are within the EU although all businesses may not be aware of this.

    If you’re customers are not VAT registered then not charging them VAT (the situation you are talking about in Gibraltar) would represent a saving to your customer.

  3. #3

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    Thanks @MJHolohan

    As I understand (from many posts and related articles and guidance notes) there are a number of territories that are within EU through treaties with member states, but outside of the scope of EU VAT (Gibraltar, Channel Islands, San Marino, Andorra etc..). I understand that a UK co that provides services to one of these companies can recover the input tax attributable to those services because the services were supplied to a taxable company “belonging” outside the EU member states. Channel islands are outside the EU for VAT purposes.

    I think a lot of big companies would use this to sell the advertising services to the offshore company who then supply them back into UK.? Does that even make sense? I'm not sure actually....But regardless that is the opposite supply I'm suggesting as it would be me providing the services not the prospective UK client.

    Maybe I'm overcomplicating this. But the main point is, if I am based in a non VATable country selling services into a VATable country (UK or IOM) is there any benefit to UKco here?

  4. #4

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    Default

    I think you are probably overthinking it Eddie. Firstly are you customers VAT registered? If they are then they can reclaim VAT anyway on sales in the UK so there will be no saving.

  5. #5

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    Default This is interesting!

    In a similar position! Looking at jersey and surrounding islands for marketing service delivery.

    In terms of set up how convoluted is this to do?

    Research suggests its thousands to set up with the right accountant and can't be done yourself.

  6. #6

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    I couldn't tell you about any specific VAT rules for the Channel Islands but from the perspective of a UK business *receiving* services from a non-VAT area, where the supply falls under the general rule for the place of supply:

    * As a B2B transaction the place of supply would be where the customer belongs, i.e. the UK
    * For the UK-based business the supply would be an import of services from outside the UK and accountable for VAT under the reverse charge in the UK
    * If the UK-based business is VAT registered then they would account for the supply under the reverse charge and this would result in no net VAT liability for them as long as they are able to fully reclaim the input VAT under normal VAT rules (e.g. they aren't mostly making exempt supplies).
    * If the UK-based business is not VAT registered then the value of the purchase would count towards their turnover as if they had supplied it for the purposes of the registration threshold.

    TLDR; there would be no benefit for any UK VAT registered business because of the reverse charge, there might be some benefit to a non-registered business as the supply would be cheaper as you wouldn't be charging any VAT (although this depends on the value of the supply due to the registration threshold rule - they would need to be careful of being pushed over the VAT registration threshold if the value of the supplies is high).

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