VAT for newbie

Astaroth · Nov 25, 2009

OK, the misses is a sole trader and manufactures baby clothing. Whilst she is below the threashold she has voluntarily registered for VAT as what she makes is zero rated but raw materials are at standard rates so it made sense.

She has been asked by a non-EU consulate to do some translation services for them next year but they want her to invoice them now (to be paid after services rendered) so that they can get it against this years budget. She has been told she needs to bill the government in the other country but that everything will be handled through the consulate in London.

I am not sure how VAT should work when dealing with non-EU governments and their UK offices etc. Plus I believe some changes are coming into force and so how this will work with the invoice being raised now but not going to be paid til circa March next year.

Zeno · Nov 25, 2009

There was a similiar case on not long ago but broadly, if you are supplying the service to the consulate in London then the supply is in the UK and subject to UK VAT.

One of the experts will be along in a minute to explain why I am wrong.

Astaroth · Nov 25, 2009

Ok, a little more googling makes me more rather than less confused. Looking at http://www.ukbusinessforums.co.uk/forums/showthread.php?p=1031548 it mentions it can be zero rated if exported.

The translation services she has been asked to do is to add english sub titles to a spanish language video. The video will be supplied and returned digitally and so can these be considered as "exported"?

Zeno · Nov 25, 2009

Astaroth said:
Ok, a little more googling makes me more rather than less confused. Looking at http://www.ukbusinessforums.co.uk/forums/showthread.php?p=1031548 it mentions it can be zero rated if exported.

The translation services she has been asked to do is to add english sub titles to a spanish language video. The video will be supplied and returned digitally and so can these be considered as "exported"?

I may be wrong but if she is returning it to the consulate in London then it cannot be considered exported. What the foreigners do with it thereafter is of no consequence (as far as I know).

alanc · Nov 25, 2009

Not an expert, but my understanding is that as long as supply of the services is to the UK, the VAT applies. Everything Zeno has said looks correct to me.

Kevin Hall · Nov 25, 2009

Intriguing question on various levels!

The first question that springs to mind is whether a Consulate counts as part of that foreign country or as part of the UK.

If it really is part of the UK, the next question is which office counts as the customer: not usually a straightforward process, though it does appear to be the UK office in this case (in which UK VAT should be charged). But if the office is not taking part in the transaction, despite having some contact with the service-provider, there might be a defence there.

The VAT changes in 2010 include "anti-forestalling" legislation. This relates to the change of VAT rate in the UK. So if you would have charged 17.5% for work done in 2010, but issue an invoice now simply in order to get the 15% lower VAT rate, this "trick" has been anticipated and is outlawed. There are some exceptions (e.g. if it is your usual practice to invoice for translation services in advance), but be wary of using that defence if you do not already have a clear history of doing so.

Few answers, but hope it helps clarify some of the issues?

David Griffiths · Nov 25, 2009

From the VAT guide

8.15 Government departments, local authorities, visiting forces etc

If you supply goods or services to government departments (including health authorities), non-Departmental public bodies, local authorities, embassies, foreign missions or international organisations in the UK, you should charge and account for VAT in the usual way.

Astaroth · Nov 25, 2009

She would be uploading it to their servers which are in south america (I assume).

The more I look into it the more complex it seems to be. It seems to suggest that the only way it would be zero rated is if it is for the business arm of the government and that it will not be used within the UK. Whilst there has been no advise from them on what the content of the videos are it is fairly likely that they will be "enjoyed" in the UK and may or may not be for a business arm of the government. Think it will be safest to charge VAT even though it makes her more expensive than the current person who I believe does it cash in hand.

ShortCouture · Nov 25, 2009

Have you tried the HMRC website? I beleive you can call them too, especially as your question is quite complex. Best to get it from them. They are actually helpful.

Williams lester · Nov 25, 2009

ShortCouture said:
Have you tried the HMRC website? I beleive you can call them too, especially as your question is quite complex. Best to get it from them. They are actually helpful.

That's a joke, right?

Zeno · Nov 25, 2009

ShortCouture said:
Have you tried the HMRC website? I beleive you can call them too, especially as your question is quite complex. Best to get it from them. They are actually helpful.

If you actually believe this then I suggest you get your accountant to look over your VAT position as soon as possible.

Astaroth · Nov 26, 2009

I did call the HMRC helpline, they said that translation services are probably VATable but have to look at notice 741 to check this and where both she and the client are considered to reside.

To be honest the cost of an accountant will probably be more than what the job will bring before paying the video editing guys. Best to play it safe and charge VAT

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