Do NON EU sales count towards the VAT turnover threshold?

[HankMcSpank]

I'm aware that a person/company has to register for VAT once 12 month rolling turnover breaches £79,000, but it's not clear to me whether non EU sales should be included in the running total towards the VAT threshold?

My inkling says it must be (cos that would benefit HMRC's coffers), but it doesn't seem logical...if something is sold to Australia or the USA, then surely no VAT should be applied? (although I think even to non EUE countries, VAT is skimmed from the shipping cost?)

Can anyone clarify?

FWIW I tried the HMRC website, but I glazed over...so I tried calling the VAT helpline...apparently I can get lost....according to their answermachine ("we're all busy - sorry, goodbye!!!)

 

[UK Contractor Accountant]

They are zero rated supplies included for your vat turnover.

 

[HankMcSpank]

So basically, what you are saying, wrt mandatory VAT registration (£79k turnover), wrt to informing when the £79k VAT turnover threshold was breached, I must include sales of goods sold to non EU countries too?!!

 

[vivente]

So basically, what you are saying, wrt mandatory VAT registration (£79k turnover), wrt to informing when the £79k VAT turnover threshold was breached, I must include sales of goods sold to non EU countries too?!!

Here's the relevant sections:

Exports, dispatches, supplying goods abroad: charging VAT
If you sell, supply or transfer goods out of the UK to someone in another country you may need to charge VAT on them. Generally speaking, you can zero-rate supplies exported outside the European Union (EU), or sent to someone who's registered for VAT in another EU country, provided you follow strict rules, obtain and keep the necessary evidence, and obey all laws. This guide will tell you when you can zero-rate your goods and what evidence you need to keep.

That confirms that non eu sales should be zero rated.

Here's the relevant section on calculating when to register for VAT:

Calculating your VAT taxable turnover
Your VAT taxable turnover includes the value of any goods or services you supply within the UK, unless they are exempt from VAT. This means you must also include any supplies you make that would be zero-rated for VAT.
When calculating your VAT taxable turnover you will of course include your sales, but for VAT purposes, you should also include the value of certain other types of supply:
goods or services that you exchange or barter - see the link below
supplies of certain services that you receive from suppliers in other countries that you have to 'reverse charge' - see the links below
where you use your own labour to construct certain building or civil engineering works for your own business use with an open market value of £100,000 or more - see the link below

Therefore for calculating your turnover for VAT register you must include your non EU sales.

 

[StevensOnln1]

Your VAT taxable turnover includes the value of any goods or services you supply within the UK, unless they are exempt from VAT. This means you must also include any supplies you make that would be zero-rated for VAT.

You seem to have missed out the sentence before the one you highlighted. To me that reads as you only count goods supplied in the UK and not goods supplied overseas.

 

[HankMcSpank]

You seem to have missed out the sentence before the one you highlighted. To me that reads as you only count goods supplied in the UK and not goods supplied overseas.

exactly ...it's not that clear is it?! (you can perhaps now sense why I glazed over when I tried to pick the bones out of their website earlier!)

 

[vivente]

You seem to have missed out the sentence before the one you highlighted. To me that reads as you only count goods supplied in the UK and not goods supplied overseas.

I did indeed and I must admit I found the wording confusing however it was the use of the word also in my quoted text that convinced me that it included all however I guess you could say that in the context of the previous sentence it could simply mean zero rated UK sales.

I will concede it is ambiguous. That would also mean that any EU sales aren't included and I didn't believe that they wouldn't want us to include EU sales. So if I'm going to include EU sales then I would have to take that sentence as not being contingent on the first sentence and therefore a general statement that zero rated sales, howsoever they arose, should form part of the total. That was my thinking anyway.

My Accountant certainly didn't advise me any differently when I went to see him prior to my registration so I'd very interested to hear others opinions as I would probably have registered 2 months too early in that case

 

[HankMcSpank]

Whilst I can clearly see why HMRC might want to include non EU sales towards assessing when someone has crossed the threshold (as it'll trigger everyone's VAT threshold for mandatory registraton earlier - kerching, "Hey George, let's spank that old outstanding Northern Rock debt"), but it doesn't make a whole lot of sense including turnover for zero rated sales for VAT turnover purposes!

 

[vivente]

Whilst I can clearly see why HMRC might want to include non EU sales towards assessing when someone has crossed the threshold (as it'll trigger everyone's VAT threshold for mandatory registraton earlier - kerching, "Hey George, let's spank that old outstanding Northern Rock debt"), but it doesn't make a whole lot of sense including turnover for zero rated sales for VAT turnover purposes!

The zero rating inclusion isn't really in question, it's just whether the zero rating for the VAT threshold calculation purposes there's the question over whether it is UK only or in general.

It does actually make sense because the product is VATable it's just that the rate is zero % and therefore there is no value attached to it. The only items that aren't VATable are those that are out of the scope of VAT and those aren't included in your calculation. When you send it a VAT return you must include your zero rated sales on your VAT return so in that context I think it is reasonable to include it in this calculation.

 

[Paul Kelly ICHYB]

When you called the HMRC helpline, what did they say?

 

[HankMcSpank]

When you called the HMRC helpline, what did they say?

pre recorded message....along the lines of, "we're too busy" (no option to wait)....."goodbye"

hence posing the question here!

It does actually make sense because the product is VATable it's just that the rate is zero % and therefore there is no value attached to it..

completely illogical!! in essence, what you are saying is that the item is vatable, but just don't add vat to it! Someone out of "Yes, Minister" could have come up with that line of thought!

 

[vivente]

pre recorded message....along the lines of, "we're too busy" (no option to wait)....."goodbye"

hence posing the question here!



completely illogical!! in essence, what you are saying is that the item is vatable, but just don't add vat to it! Someone out of "Yes, Minister" could have come up with that line of thought!

Not sure if you were directing that at me as that was my line or if it was a general complaint. The fact is that is the rules therefore it isn't illogical however if you think the policy of zero rating is illogical it is only because you haven't fully considered it. There is a very important distinction between zero rated products and services and exempt products and services. Generally you can reclaim input taxes on those zero rated sales whilst no output tax has been charged however you cannot reclaim input taxes for sales of exempt items.

 

[Scalloway]

completely illogical!! in essence, what you are saying is that the item is vatable, but just don't add vat to it! Someone out of "Yes, Minister" could have come up with that line of thought!

That is how it works. If I recall corectly the EU say what goods and services must have VAT charged on them. In the UK it was decided that the rate for certain things would be zero, eg food and childrens clothes, to prevent an outcry.