Issuing Invoices to Avoid VAT - where is the line?

[iBisDev]

Hello,

When is it legal to change invoice address to outside of EU for services received in the UK for the purposes of VAT avoidance?

Situation:

An individual wanted to set up a business and made an agreement a consultancy firm for business consultations. The consultancy firm quoted the sum X and the individual actually agreed to that sum X in a written form. But when she received the final invoice she actually got the agreed sum X + VAT fees. The additional VAT fees were neither mentioned in the initial quote/email, nor there was any mentioning of additional VAT fees verbally.

The individual challenged the final sum because 1) she can't pay more than X, 2) she doesn't have any means to return the VAT fees as she is not LTD yet.

The consultancy said that "it is common business practice to quote prices exclusive of VAT" even though this was not mentioned anywhere prior to locking up the consultation agreement and quote.

But then the consultancy asked to provide the non-EU address of the individual (as she has dual citizenship of UK and another non-EU country), because that way the invoice could be issues without VAT. The individual is residing most of the time in the UK (99% of the time) and only occasionally visits her other non-EU country. Although the consultancy said that this is totally legal, the whole situation appears very suspicious. She is happy to pay for the services but not more than the agreed price X.



Question-

1) what should be the best cause of action for the individual?

2) when it will be legal for the individual to agree to provide the non-EU address for the purposes of VAT avoidance as suggested by the consultancy?

 

[Daugela]

Hi, the facts of the matter always prevail.
Is there anywhere in the initial contract mentioned the situation with vat or other applicable taxes?
And what kind of consultancy would be trying to trick businesses like that (presuming the described situation above)?

 

[Adam93]

No, it is not legal to avoid VAT by simply changing an address.

VATA 1994 s.9(3) - place where the supplier or recipient of services belong - a person is treated as belonging in the 'relevant country', the relevant country being where the person has a business establishment. If there is no business establishment, place of belonging is the country in which is the persons usual place of residence.

I would suggest you point this consultancy business in the direction of the VAT legislation before they get themselves in hot water.

VAT is due. Whether the quote including VAT or excluded VAT is a separate issue altogether. Is there not a quote you can refer to?

 

[iBisDev]

Thank you all!

I believe the correct course of action is to ensure VAT is paid, correct address is indicated at the invoice, and the quoted price is inclusive of VAT. The consultancy would have to bear the costs for the not informing the consumer of the service (who is not trading and not registered as a business) that the quote is not inclusive of VAT.

 

[Mr D]

Thank you all!

I believe the correct course of action is to ensure VAT is paid, correct address is indicated at the invoice, and the quoted price is inclusive of VAT. The consultancy would have to bear the costs for the not informing the consumer of the service (who is not trading and not registered as a business) that the quote is not inclusive of VAT.

Was this a consumer quote or a business quote?