Do i charge VAT to USA based customer?

Discussion in 'Accounts & Finance' started by myk3, Oct 26, 2011.

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  1. myk3

    myk3 UKBF Newcomer Free Member

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    Hi there,

    I run a Ltd company which provides outsourced IT support/services.

    we have a new customer who are also an IT consultancy firm who are based in the USA. They have a client in the USA who also have a small office in London and they would like to contract us to work 1 day a week at this customers location.

    They want us to invoice them (The USA IT consultancy firm) direct and we are confused if we should charge VAT?

    We will be working for their customer in the UK office and NOT the IT firm in the USA.

    As we will be providing a service to a company in the USA and we are not working for them in the UK but instead one of their customers am i correct to say that we dont need to charge VAT?

    thanks,
    mike
     
    Posted: Oct 26, 2011 By: myk3 Member since: Nov 25, 2010
    #1
  2. SBlundell

    SBlundell UKBF Enthusiast Full Member - Verified Business

    753 185
    Not 100% sure here, but HMRC website seems to state:

    The general rule for working out the place of supply of services (apart from those covered by special rules)
    You supply services to a:
    business customer

    The place of supply is:
    the place where the customer belongs

    The USA company is your customer - it's them that you are invoicing & who is, presumably, liable to the end user for your work. Ergo, you are supplying to the USA and therefore it's outside the scope of VAT.

    However, as stated, I'm not 100% sure & as always I would recommend having a chat to your own bean counter ;)
     
    Last edited: Oct 27, 2011
    Posted: Oct 27, 2011 By: SBlundell Member since: Aug 10, 2011
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  3. Business News

    Business News UKBF Enthusiast Free Member

    569 93
    I never figured out why people don't ask HMRC directly, this can be done over the phone or via an email. I've always found them quick to respond and as the saying goes - you have it straight from the horses mouth. If the info is wrong then nothing works better than you told me to do it that way!
     
    Posted: Oct 27, 2011 By: Business News Member since: Feb 2, 2009
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  4. Mike tells it like it is

    Mike tells it like it is Banned

    1,100 125

    I do.

    Trying to get a straight answer out of the call centre operative who eventually answers the phone at HMRC is like blood out of a stone.

    Like so many companies in this country you never talk to anyone who knows their

    **** - but just a call centre person given a script and standard answers to easy general questions. HMRC' standard policy on any question seems to be ignorance, buck passing and incompetance.

    How many cock ups must be made with UK tax before the guy is firedpffft

    Oh eyah sorry I forgot its all the same little club as the bankers,meps etc etec
     
    Posted: Oct 27, 2011 By: Mike tells it like it is Member since: Sep 27, 2011
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  5. SBlundell

    SBlundell UKBF Enthusiast Full Member - Verified Business

    753 185
    Probably because HMRC could have a vested interest in you paying more tax?

    Whereas your accountant / UKBF professionals are more likely to have 'similar but alternative' suggestions which are more tax efficient? Or plan towards some future event which may incur different tax implications.

    Eg. asking HMRC about buying a car for a sole director ltd co & they'll presumably tell you all about benefits in kind, fuel scale charges etc (if you get the right departments!). Whereas your hired tax professional would point out you're probably better off claiming mileage at 45p a mile for a personal car......
     
    Posted: Oct 28, 2011 By: SBlundell Member since: Aug 10, 2011
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  6. antropy

    antropy OpenCart Experts Full Member - Verified Business

    3,345 575
    Nah that's not how they roll, if you don't need to pay the tax they'll tell you. And I've also always found them very helpful.
     
    Posted: Jun 8, 2012 By: antropy Member since: Aug 2, 2010
    #6
  7. SuffolkDesigns

    SuffolkDesigns UKBF Old Timer Full Member - Verified Business

    2,763 360
    If a sale is made outside of the EU then it is zero rated. For digital goods or services the transaction is considered to have taken place at the location of the purchaser.

    This is why US companies are charging VAT when we buy digital goods from them, as it is considered to be a sale in the EU and the relevant VAt should be charged.
    Although, what percentage actually makes it back to the treasury I have no idea, and I'm also not sure how the EU can tell other countries what taxes they should charge.
     
    Posted: Jun 8, 2012 By: SuffolkDesigns Member since: Jul 5, 2005
    #7
  8. teddys

    teddys UKBF Enthusiast Free Member

    855 198
    This looks like a case of B2B services. The general rule for B2B services is that the 'place of supply' is where the customer is established i.e. the US. However, your services look 'electronically supplied'. If electronically supplied services are 'used and enjoyed in the UK', then the place of supply will be the UK and VAT should be charged. So in your case UK VAT should be charged.

    Read 17.2 here http://customs.hmrc.gov.uk/channels...ROD1_029955&propertyType=document#P994_125123
     
    Posted: Jun 8, 2012 By: teddys Member since: Apr 30, 2011
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  9. SuffolkDesigns

    SuffolkDesigns UKBF Old Timer Full Member - Verified Business

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    Didn't know that bit, what I posted above is what I was told on the phone.
    So, as an example for digital services, if a UK company has servers in the US and sells them to a US client then no VAT, however if the servers are in the UK then VAT applies to all clients?
     
    Posted: Jun 8, 2012 By: SuffolkDesigns Member since: Jul 5, 2005
    #9
  10. teddys

    teddys UKBF Enthusiast Free Member

    855 198
    Posted: Jun 8, 2012 By: teddys Member since: Apr 30, 2011
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  11. betamax

    betamax UKBF Newcomer Free Member

    1 0
    Sorry to hijack this thread! I have a similar question.

    I supply electronically delivered goods. I am currently under the VAT threshold but am close so am trying to keep under that limit for now (I'm about at the max workload I can handle at the moment so it doesn't make sense for me to go over that threshold for now).

    Anyway, I get that if my customer (mine are virtually all members of the public and not businesses) is based in the EU then I would have to charge VAT and if outside the EU then no VAT would need to be paid.

    Does that mean that only EU customers count for working out if I am under the threshold? Or is it total sales no matter where they are from?

    If I have 50k of sales from EU folk and 20k from non-EU does that mean I have 25k before I hit the threshold or 5k?

    Thanks in advance! :)
     
    Posted: Jun 28, 2012 By: betamax Member since: Jun 28, 2012
    #11
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