Contractors’ Questions: How to invoice a client in the Caribbean -- with or without VAT?

Contractor’s Question: I am a UK tax resident and own a limited company. I provide IT services currently within the UK and I invoice my clients with VAT. Nice and straight forward, right!?

Thing is, I’ve now been asked to assist a client in the Caribbean, remotely from the UK and I’m unsure how I should invoice them. For example, should they be billed in GBP? And I assume no VAT would need to be paid as they are not in the UK; is that correct? Or would I need to apply VAT as the work is being carried out in the UK?

I’ve asked my accountant and they have not been very helpful saying they can only provide advice on UK matters, which has peeved me off a bit! Thanks up front.

Expert’s Answer:  If you are supplying services to a client in the Caribbean, you need to bill in the currency that you agree with your client. If that’s GBP then that is simple for you. If it is another currency (and USD is currently the most common in cases like these), then you will ask your client to pay you in USD too.

Conversion, or a new account?

Your bank would then convert the funds into sterling when they receive them. An alternative for you to consider could be for you to ask your bank for an account in USD, so that you can better control when and at which rate the conversion occurs.

As to your other questions, no, you do not need to charge VAT to your client in the Caribbean, as the transaction will be considered an export for VAT purposes.

Avoiding a storm

Lastly, just a word of warning if I may. The Caribbean is undoubtedly a beautiful place, but pursuing unpaid debts there won’t seem like much of a holiday! If you have the slightest doubt about your client paying you or when they might pay you, think about seeking upfront payments or stage payments to make sure that you are not working for no pay. Best of luck with the new remote working gig!

The expert was Kevin Austin, managing director of overseas contracting advisory Access Financial.

Wednesday 24th Feb 2021
Profile picture for user Kevin Austin

Written by Kevin Austin

Kevin is a Fellow of the Institute of Chartered Accountants in England and Wales, a Fellow of the Association of Chartered Certified Accountants, a Fellow of the Association of International Accountants and a Fellow of the Chartered Management Institute.

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