VAT FRS and EU purchases

[Contreras]

I intend to make a small IT hardware purchase, the best price (significantly so) is direct from the manufacturers online retail presence which happens to be registered in Ireland.

At the checkout you can enter a VAT no. which reduces the total by a factor of 1.2, i.e. net of 20% VAT (which is curious because Ireland VAT rate is 23%, but never mind about that...). The VAT content is still owed but is now MyCo's responsibility to account for this via the VAT return in boxes 2 & 9, correct?

One good reason to use FRS is because it simplifies the admin. Having to account for purchase VAT is a complication I could do without. So, is there a rule that it must be done like this, rather than simply paying the consumer price inc. VAT ? TBH, even if there is such a rule it would seem a rule begging to be brokenignored.

Which got me thinking... isn't this an opportunity for wide-scale consumer VAT fraud? Joe Public discovers that by pretending to be a business and entering a valid GB VAT no. online they can get ~20% discount. The site does validate the VAT no. but I am doubtful that this is could be any more sophisticated than calculating/validating the check digits.

[TheCyclingProgrammer]

You don't say if you're purchasing goods or services (edit: oops, yes you do), but generally speaking:

For services, the supplier should not charge VAT (often mistakenly referred to as "zero-rating" but it should just be no VAT as its not considered a taxable supply from the suppliers POV) if you supply them with your VAT number. You need to account for the supply on your own VAT return using the reverse charge. The reverse charge is dealt with outside the FRS, so you effectively treat it as if you were both the supplier and receiver of the service. You add the input VAT to Box 4 and the output VAT to Box 1, cancelling each other out. I've had mixed responses on whether you should include in Box 6 and 7 (I've been told yes and no by HMRC) but FreeAgent does so that's what I do.

For goods, the supplier zero rates the supply and you pay VAT on import (acquisition tax). This cannot be reclaimed on the FRS.

So in short, buying your services from outside the UK (not just the wider EU, the reverse charge applies to any service you buy from a non-UK supplier) can save you money as you don't pay any VAT. For goods, you still end up paying VAT so no advantage.

https://www.gov.uk/vat-imports-acqui...es-from-abroad

It is a PITA; I don't know if retailers are obliged to treat a transaction as B2B when a VAT number is supplied but I'd imagine they probably are. I couldn't show you an reference to EU VAT law to back that up though. I know that Apple always used to state that all app purchases through the app store were "for personal use only" and so you would get charged Luxembourg VAT even if you were purchasing an app for your business and it would be pretty much impossible to recover that VAT (prior to the new EU VAT rules of course). That's for services though.

[TheCyclingProgrammer]

The site does validate the VAT no. but I am doubtful that this is could be any more sophisticated than calculating/validating the check digits.

Any online retailer should be verifying the VAT number is correct using VIES.

[Contreras]

OK, perhaps the OP was a little verbose, let's try again.

It's a small IT hardware purchase.

The question: is it perfectly legit to not provide a VAT no. and therefore ignore all this nonsense?

Well... It makes no difference to the tax owed so I'm rather intent on doing that anyway, unless there is specific guidance against it.

[TheCyclingProgrammer]

I don't know if you're obliged to provide your VAT number to be honest but it can make a difference.

If you don't provide a VAT number (the supplier also needs evidence that the goods are leaving their country) then you might be charged the suppliers local VAT rate which could be lower or higher than the UK rate.

But if the suppliers sales are over a certain threshold, they may be liable to register for VAT in the destination country and charge the VAT rate where the customer belongs. This might explain why your Irish supplier was charging you UK VAT. In this case, it makes no difference if they charge the VAT or you pay import VAT.

The best way to understand how it works is read the UK guidance for exporting goods as the rules should apply to suppliers in other EU countries too.

https://www.gov.uk/vat-exports-dispa...g-goods-abroad