VAT on EU Services with Flat Rate scheme election

[taylorsan]

Hi, I'm wondering if anyone can shed some light on some conflicting views.

My company is VAT registered on the flat rate scheme and I am providing IT Consultancy services to a VAT registered business in Ireland.

My understanding is that as long as I show their VAT number on my invoice, I should zero rate the supply. With regards VAT reporting, the Turnover need not be shown on my VAT return.

Can anyone confirm/deny?
Many thanks.

[3pic]

The Flat Rate Scheme doesn't take into account reduced or zero rated sales.

See here :-

http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm#3

You still have to apply your Flat Rate percentage to your turnover, so even when you haven't charged VAT to the customer, you still have to pay your flat rate % over to HMRC.

As the link states, if you do a lot of zero rated sales (intra-EU) then the scheme may not be for you.

Why would you not show your business turnover on the VAT return?. Under the Flat Rate scheme all income should be included, including bank interest earnt, etc. If on the ordinary VAT scheme you would still report such sales, even though output tax may not be due.

The whole zero rating if you have the Irish VAT number is correct and so you can zero rate the invoice to the customer - if you were on the normal scheme that would be the end of it, but on Flat Rate, you pay your % over. :(

[Zeno]

I was of the understanding that the place of supply would be the Irish Republic as it is ITconsultancy and therefore outside the scope of UK VAT. I understand this should then be left out of the FRS VAT caluclations

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ShowContent&id=HMCE_CL_000345&propertyType=document

6.3

where is the work carried out?

[taylorsan]

Thanks for the replies folks.

The work is being carried out in Ireland and it is for IT consultancy services. Confusion has arisen as I've had conflicting advice:

1 - a discussion with HMRC helpline was very clear that my Irish Turnover should not appear on my VAT return (outside the scope of UK VAT). I do however have to state the VAT number of the customer on my invoices.
2 - The accounting software I'm using (Kashfow) doesn't treat it that way, and includes it in the calc. Discussions with the vendor have been inconclusive. ' We can't have the software prepare returns on both basis as only one of them (who knows which!) is correct'

It's the 'who knows which' I'm trying to resolve.

Re Flat rate, it works for me this year (my first) because a lot of my turnover will be in Ireland (not all) and owing to the simplicity of the process.

[Williams lester]

Thanks for the replies folks.

The work is being carried out in Ireland and it is for IT consultancy services. Confusion has arisen as I've had conflicting advice:

1 - a discussion with HMRC helpline was very clear that my Irish Turnover should not appear on my VAT return (outside the scope of UK VAT). I do however have to state the VAT number of the customer on my invoices.
2 - The accounting software I'm using (Kashfow) doesn't treat it that way, and includes it in the calc. Discussions with the vendor have been inconclusive. ' We can't have the software prepare returns on both basis as only one of them (who knows which!) is correct'

It's the 'who knows which' I'm trying to resolve.

Re Flat rate, it works for me this year (my first) because a lot of my turnover will be in Ireland (not all) and owing to the simplicity of the process.

You do need to include the EU turnover in your VAT return and pay the flat rate on it, see the section from HMRC guidance below;



Working out how much VAT you need to pay using your flat rate percentage

You calculate your VAT payable to HMRC by applying your flat rate VAT percentage to your 'flat rate turnover'. If you are still in your first year of VAT registration, remember to reduce your flat rate percentage by one.



Your flat rate turnover is all the supplies your business makes including all:

VAT inclusive sales for standard rate, zero rate and reduced rate supplies
sales of exempt supplies, such as rent or lottery commission - you don't have to make any partial exemption calculations
sales of capital expenditure goods - unless you have previously reclaimed the VAT, in which case they must be accounted for at the standard rate and not the flat rate.
sales to other EU countries
bank interest received on a business account
sales of second-hand goods - but if you sell a lot of these, you may be better off leaving the Flat Rate Scheme and using a margin scheme

I would suggest getting yourself an accountant.

[David Griffiths]

The work is being carried out in Ireland and it is for IT consultancy services.

Have you considered that you might well have to register for VAT in Ireland?

If the work is being carried out there, you will have to register if you exceed the Irish VAT registration threshold, and I have a memory from somewhere that the threshold is Nil for non Irish resident companies.

Have a look at paragraph four of this document (http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/traders/vat_community/dec2007/vat_ec_ei-en.pdf), which confirms this.

I'm not a VAT specialist by any means, and have next to no knowledge of Irish VAT, but I think that you should be aware of this.

[3pic]

Thanks for the replies folks.

The work is being carried out in Ireland and it is for IT consultancy services. Confusion has arisen as I've had conflicting advice:

1 - a discussion with HMRC helpline was very clear that my Irish Turnover should not appear on my VAT return (outside the scope of UK VAT). I do however have to state the VAT number of the customer on my invoices.
2 - The accounting software I'm using (Kashfow) doesn't treat it that way, and includes it in the calc. Discussions with the vendor have been inconclusive. ' We can't have the software prepare returns on both basis as only one of them (who knows which!) is correct'

It's the 'who knows which' I'm trying to resolve.

Re Flat rate, it works for me this year (my first) because a lot of my turnover will be in Ireland (not all) and owing to the simplicity of the process.

If you are physically carrying out a service in Ireland (ie, you go there and do an install say), then the place of supply is Ireland.

If you are just doing web design/consultancy that takes place in the UK then it will come under the rules you are already aware of....zero rating it with the customers VAT number on show, etc.

If you are not based in Ireland, then you have to register for VAT in Ireland as there is a Nil VAT registration threshold for non-resident traders. If you are registered for VAT in Ireland then of course, this does not appear on your UK VAT Return at all, but it will be a sale for your Irish VAT return and you'll charge your irish client Irish VAT (21.5%).

[3pic]

Have you considered that you might well have to register for VAT in Ireland?

If the work is being carried out there, you will have to register if you exceed the Irish VAT registration threshold, and I have a memory from somewhere that the threshold is Nil for non Irish resident companies.

Have a look at paragraph four of this document (http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/traders/vat_community/dec2007/vat_ec_ei-en.pdf), which confirms this.

I'm not a VAT specialist by any means, and have next to no knowledge of Irish VAT, but I think that you should be aware of this.

You beat me to it David (that'll teach me to go make a coffee in-between writing a post!)

You're doing very well for a non-VAT bod!:)

[KM-Tiger]

If you are physically carrying out a service in Ireland (ie, you go there and do an install say), then the place of supply is Ireland.

Thanks for that clarification. This is of interest to me as I am just starting some work for a European client.

In my case the vast majority of work (certainly more than 95%) is carried out in the UK, but there could be a very occasional visit to do something over there.

Am I safe to ignore that for VAT purposes?

[3pic]

Thanks for that clarification. This is of interest to me as I am just starting some work for a European client.

In my case the vast majority of work (certainly more than 95%) is carried out in the UK, but there could be a very occasional visit to do something over there.

Am I safe to ignore that for VAT purposes?

Yes, it'll come down to how you structure your contract with the client to a degree. If you have a single contract to provide 'X' then if that is mostly done in the UK then you are still making a single supply of 'X' to the customer and so will fall under place of supply rules which for such services is where the customer is based and therefore is zero rated.

Ireland is the odd one out really for this kind of thing.

[KM-Tiger]

Thanks again, it would indeed be a contract to supply X.

[Zeno]

Can I just confirm that if the place of supply is indeed the Irish Republic, this is not included in the FRS calculation?

[markmclaren]

You may find Section 6.4 of VAT Notice 733 relevant:

"If your business sells services to other Member States of the EU and your supplies are outside the scope of VAT, leave them out of your flat rate turnover. This will depend on the place of supply of the services."

[Alpha]

Can I just confirm that if the place of supply is indeed the Irish Republic, this is not included in the FRS calculation?

Zeno

I'm pretty sure that they are included in the FRS calculation. Supplies of goods and services outside the EU are Zero rated not outside the scope therefore should be included in the calculation...........waits for one of the vat bods to tell me I'm completely wrong:)

[Zeno]

Zeno

I'm pretty sure that they are included in the FRS calculation. Supplies of goods and services outside the EU are Zero rated not outside the scope therefore should be included in the calculation...........waits for one of the vat bods to tell me I'm completely wrong:)

Yes but the work is being carried out in the Irish Republic. Based on the information in the link earlier, I thought that this would be left out?

[David Griffiths]

Zeno

I'm pretty sure that they are included in the FRS calculation. Supplies of goods and services outside the EU are Zero rated not outside the scope therefore should be included in the calculation...........waits for one of the vat bods to tell me I'm completely wrong:)

It's all down to the place of supply rules (and I've no intention of going into those, thank you! :)). I think that if the place of supply is outside the UK, then the supply is outside the scope of UK VAT. If the place of supply is in the UK, then VAT applies, not always at zero rate.

In this case, the place of supply seems to be Ireland, therefore it's outside the scope for UK VAT but very much within the scope of ROI VAT.

[Zeno]

Sorry to harp on but just for my own piece of mind - Supplies out with the scope of UK VAT are not included in FRS workings?

[RAL]

Zeno

I'm pretty sure that they are included in the FRS calculation. Supplies of goods and services outside the EU are Zero rated not outside the scope therefore should be included in the calculation...........waits for one of the vat bods to tell me I'm completely wrong:)

If a business sells goods to other EC countries, the income must be included in its flat-rate turnover.

However, as David said, If a business supplies services which, under the place of supply rules, are treated as supplied outside the UK, then these supplies should be left out of the flat-rate turnover.

Vat Notice 733, Para 6.4

[Alpha]

It's all down to the place of supply rules (and I've no intention of going into those, thank you! :)). I think that if the place of supply is outside the UK, then the supply is outside the scope of UK VAT. If the place of supply is in the UK, then VAT applies, not always at zero rate.

In this case, the place of supply seems to be Ireland, therefore it's outside the scope for UK VAT but very much within the scope of ROI VAT.

Yes I know....teach me to skim read a thread.

Exactly what you said:)

I thought that you had already covered this argument and the subsequent question was simply regarding services supplied in UK and goods exported from Uk.........I'll go off and carry on with my forecasts:redface:

[elainec100@cheapaccounting]

Supply is left out of flat rate calc - I have checked with our vat chappy.

Bear in mind changes on 01/01/10 - see here:

http://www.hmrc.gov.uk/vat/cross-border-changes-2010.htm

[Alpha]

Sorry to harp on but just for my own piece of mind - Supplies out with the scope of UK VAT are not included in FRS workings?

Yes as David has already pointed out (In part):)

[Zeno]

Bloody flat rate scheme. Simpler accounting my arse.

[Zeno]

Yes as David has already pointed out (In part):)

See, this is what I thought from the start but nobody seemed to agree. Visions of expensive PII claims etc.

[Alpha]

Bloody flat rate scheme. Simpler accounting my arse.

Actually it is simpler if you only do business in the UK and maintain all your records by spreadsheet or 14 column analysis book:D

[Jenni384]

14 column analysis book:D


ARGH!!!!!!



but yes.... :rolleyes: :D