EU VAT (b2b)

[worldexplorer]

Hi there,

I have a couple of questions regarding EU VAT, hope someone can help?

1. If I sell my products to another business in the EU that is VAT registered (I'm also VAT registered) should I remove the VAT from the order?

2. As a smallish business I pay a flat rate of VAT (based on turnover). If I don't charge the EU business customers VAT should I then remove these orders from the total turnover (from which the VAT is calculated)?

3. My flat rate VAT is 5% - if I can subtract the VAT from EU orders - will I loose out if I take 15% off the order?

Many thanks for your help.
Nick

[Kevin Hall]

1. A customer registered for VAT overseas would not expect to be charged UK VAT on goods transported to their country from the UK. Your sales invoice should therefore show no VAT charge and should give a justification for this (e.g. "No VAT: Goods dispatched from the UK to another EC Member State").

2. However, from your point of view, the sale is still included in the turnover total on which your VAT liability is calculated at your Flat Rate%. Section 6.4 of HMRC's VAT Notice 733 states:

If your business sells goods to other Member States of the EU, then include this income in your flat rate turnover.

If your business has a higher proportion of this type of sale than others in your trade sector you may find that operating the flat rate scheme puts you at a disadvantage compared to your competitors.

3. So you will lose out, because sales which would have no VAT charged on them will actually cost you VAT in the Flat Rate calculation. If you have a lot of sales to EC customers, you might want to consider coming out of the Flat Rate Scheme and simply zero-rating your sales.


Hope it helps?

[worldexplorer]

Hi Kevin,

Thats a big help, thank you.

I will have a look into whether its worth coming out of the flat rate scheme in the near future. At present its only a few people (distributors for us) in the EU we supply but this is likely to increase in the future.

The flat rate does save us alot of time at present and I may be able to charge slightly more (exc VAT) for EU orders which would help things at present.

Again many thanks for your help.
Nick