Add VAT on business services rendered to companies in the USA?

[AffiliateManager]

One of my contacts is starting a UK web design and consultancy service. Some of the clients will be businesses in the USA and Canada.

When services are provided to the companies in the USA and Canada, does one need to add VAT to the invoices or not please?

I've looked on the relevant sections of the HMRC website but wished to clarify.

Thank you.

​

 

[NickMoore]

Supplies of services from the UK to outside the EU are not subject to VAT.

 

[greengecko]

As above, however if you were to host the sites on a UK server to a UK audience I believe you would still need to charge VAT even to clients outside the UK.

Feel free to correct me anyone if I'm wrong, can't entirely remember where I saw this.

 

[KM-Tiger]

Although the general rule is that services to companies outside the EU don't attract VAT, there are additional rules for electronically supplied services where if the "effective place of use and enjoyment" is in the UK or EU, then VAT will be applicable.

I asked a similar question recently about Switzerland, and turned up this flowchart that may help.

 

[teddys]

One of my contacts is starting a UK web design and consultancy service. Some of the clients will be businesses in the USA and Canada.

When services are provided to the companies in the USA and Canada, does one need to add VAT to the invoices or not please?

I've looked on the relevant sections of the HMRC website but wished to clarify.

Thank you.

​

1. Yours is case of supply of services where you need to determine 'place of supply' first.

2. The general rule for a B2B supply (applicable in your case) is that the supply is where the customer belongs.

3. However, web design services are electronically supplied, in which case special rules apply. The special rules mean that 'place of supply' in such circumstances will be determined on the basis of where the services are effectively 'used and enjoyed'.

4. So if the web design services are used and enjoyed in the UK then VAT should be charged. One way to determine this is to see if the website is hosted in the UK. If it is then VAT should be charged.

Hope this helps.

 

[Alan]

Are web deisgn services electronically supplied?

I would agree that telecoms and hosting are electronically supplied, but is it true of design?

So does that mean a voice over artist that records a voice over in the UK for a US company would have to charge VAT because the recording is on an electronic media, but not charge VAT if he recorded on an old fashioned vynl record?

What if an UK accountant gives advice to a Swiss firm and uses e-mail or a PDF document to convey that advice, rather than posting a typed report?

I'm asking to seek clarity on this, as a very many services today could be considered electronically supplied.

 

[teddys]

Are web deisgn services electronically supplied?

I would agree that telecoms and hosting are electronically supplied, but is it true of design?

So does that mean a voice over artist that records a voice over in the UK for a US company would have to charge VAT because the recording is on an electronic media, but not charge VAT if he recorded on an old fashioned vynl record?

What if an UK accountant gives advice to a Swiss firm and uses e-mail or a PDF document to convey that advice, rather than posting a typed report?

I'm asking to seek clarity on this, as a very many services today could be considered electronically supplied.

Have a read of 15.12.2 here

 

[Alan]

I appreciate the link but a synopsis would be useful.

the wording says

This paragraph covers a service:

delivered over the Internet or an electronic network (in other words is reliant on the Internet or similar network for its provision), and
where the nature of the particular service means it is heavily dependent on information technology for its supply. In other words the service is essentially automated, involving minimal human intervention and in the absence of information technology does not have viability.

So web design, which requires human beings does not fall in paragraph 16(2)(k)


The clause, and examples are quite clear that it is looking at activities that are automated through the use of technology and design (as is giving accounting or legal advice) not part of that.

 

[UKSBD]

I would say website supply and website design are different things.

I assume that designing the site and handing over files for someone else to run the website wouldn't be an electronic supply, where as supplying a website or hosting a website would be.

 

[teddys]

If the website design is about consultancy then it won't be an electronically supplied service. But generally website design services are turnkey ones. Here are some more examples

 

[UKSBD]

That appears to contradict what Google say about AdSense

http://support.google.com/adsense/bin/answer.py?hl=en-GB&answer=1322031#GB

Where they say "the services provided are subject to the reverse charge mechanism and so VAT is to be accounted for by the recipient, Google Ireland, per Article 196 of Council Directive 2006/112/EC."

If Google are wrong there must be £millions of VAT which should be going to the UK instead of Ireland.

It also contradicts schedule 5 which lists Advertising Services as supplied where received.

 

[Alan]

If the website design is about consultancy then it won't be an electronically supplied service. But generally website design services are turnkey ones. Here are some more examples

None of those example mention the word design. Nor does it mention 'turnkey' what ever you mean by that.

By design, I mean that a human being recieve the business requirements from a client then designs and devlops a solution, this is inherrently a human function. To me 'design' comes from a designer, which is a person.

If by 'website design' you mean self build tools like Wix.com or 1&! provide thafall under "the supply of digitised products generally, including software" - however I wouldn't call that website design, but I would call that website tools.

 

[teddys]

By 'turnkey' (not a taxman's term) what I meant was that website design fellows normally offer all the services under one roof: design, maintenance, hosting etc If your work involves just designing a website and sending the codes over to the client in the US then obviously there is no VAT.