Export to Alderney

[redgiant]

Current gambling clientco is trying to change all contracts to be to an Alderney based company with the reason being sited that it saves on VAT. Does anyone have any experience in contracts where the service is being provided still from the UK? I have asked my accountant and without the new contract it's hard to see what the implications are going to be.

I have two concerns:

1) I'm on the flat rate VAT scheme and missing out on the revenue from that (6%)
2) Implications of being investigated by HMRC as the services are still being provided from the UK from either my London office or clientco's London office

Thanks in advance for any experience, advice shared etc.

[tractor]

..

Current gambling clientco is trying to change all contracts to be to an Alderney based company with the reason being sited that it saves on VAT. Does anyone have any experience in contracts where the service is being provided still from the UK? I have asked my accountant and without the new contract it's hard to see what the implications are going to be.

I have two concerns:

1) I'm on the flat rate VAT scheme and missing out on the revenue from that (6%)
2) Implications of being investigated by HMRC as the services are still being provided from the UK from either my London office or clientco's London office

Thanks in advance for any experience, advice shared etc.

If not Amember (Join PCG)

ELSE (CALL PCG TAX HELP LINE)

But to be fair, until you get your hands on that contract proposal, no one can give you much advice let alone good advice.

[ASB]

I would suggest you explain the situation to the VAT help line. Ask them for an opinion, note the call reference number and ask them to put it in writing.

Bottom line, up your rate by 20% and that should cover the likely possible downside.

[Craig at Nixon Williams]

As it is services being provided, the place of supply will be the country that the customer is based, irrespective of the physical location that the work is carried out. Therefore if you will be sending your invoice to somewhere outside the UK then you will not need to charge VAT.

As the supply will be outside the scope of UK VAT you will not charge VAT on the invoice, and you will not pay it over to HMRC either.

If the client’s trade is gambling then they will be exempt from VAT which means that they will not be able to reclaim it on their inputs – this means that they would not be able to get back what you charge, making your services 20% more expensive to them.

Craig

[eek]

As it is services being provided, the place of supply will be the country that the customer is based, irrespective of the physical location that the work is carried out. Therefore if you will be sending your invoice to somewhere outside the UK then you will not need to charge VAT.

As the supply will be outside the scope of UK VAT you will not charge VAT on the invoice, and you will not pay it over to HMRC either.

If the client’s trade is gambling then they will be exempt from VAT which means that they will not be able to reclaim it on their inputs – this means that they would not be able to get back what you charge, making your services 20% more expensive to them.

Craig

So in plain language

Currently you charge them VAT and because they are a gambling company they cannot claim that 20% back.

By moving their operations to Alderney you will no longer need to charge them VAT (as it is treated as an export of services outside the EU).

Hence they save 20% just by changing who you invoice to...


Oh and the saving is nothing like 6% on flat rate tax. Its ((100*1.2)/(1-0.145)) - 1 or 1.4%

[kal]

You will need to come off the FRS scheme then surely?

[Craig at Nixon Williams]

So in plain language

Currently you charge them VAT and because they are a gambling company they cannot claim that 20% back.

By moving their operations to Alderney you will no longer need to charge them VAT (as it is treated as an export of services outside the EU).

Hence they save 20% just by changing who you invoice to...


Oh and the saving is nothing like 6% on flat rate tax. Its ((100*1.2)/(1-0.145)) - 1 or 1.4%

Correct!

Although I'm not sure about your maths on the last bit...assuming the FRS% is 14% then the saving would be 3.2% (120*14%=16.8 & 20-16.8=3.2)

Craig

[d000hg]

You will need to come off the FRS scheme then surely?

No, it just won't be financially advantageous any more. In real terms the loss would probably be peanuts so it depends if you expect to be working with another UK company shortly or not.

[kal]

No, it just won't be financially advantageous any more. In real terms the loss would probably be peanuts so it depends if you expect to be working with another UK company shortly or not.

Would it though? On the FRS scheme you pay a %age based on your turnover (regardless of whether you charge VAT or not). If you're no longer charging that VAT to the client then you are almost 20% worse off surely

[d000hg]

Would it though? On the FRS scheme you pay a %age based on your turnover (regardless of whether you charge VAT or not).

Which FRS scheme are you on?!