VAT analysis on platform business

Discussion in 'Accounts & Finance' started by IPR, Feb 11, 2018.

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  1. IPR

    IPR UKBF Newcomer Free Member

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    I am developing a platform which will connect non-EU service providers with customers in the UK. I will apply a fee to each transaction on the platform to generate revenue for my company. Can anyone advise whether, and, if so, why, I will be required to charge VAT on these transactions?

    If it helps, I gather that Uber et al have developed VAT analyses such that they are merely collecting payment for drivers and adding a commission, and therefore they don't have to charge VAT.
     
    Posted: Feb 11, 2018 By: IPR Member since: Jan 7, 2018
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  2. Scalloway

    Scalloway UKBF Legend Free Member

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    Posted: Feb 11, 2018 By: Scalloway Member since: Jun 6, 2010
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  3. IPR

    IPR UKBF Newcomer Free Member

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    Thanks Scalloway - that did help. It led me down an HMRC rabbit hole, and my findings - in case they are useful for others - were as follows:

    • VAT is applicable to supplies of goods and services.
    • I should view my business as engaging in two supplies: Supply (a) is the supply of services from the non-EU service provider to the customer; Supply (b) is the supply of agent services from me to the non-EU service provider.
    • As Supply (a) is a B2C supply, its 'place of supply' is the location where the business is located.
    • As the business is located in a non-EU country, then the place of supply is non-EU, and therefore VAT is not applicable to that supply.
    • As VAT is not applicable to Supply (a), then as an intermediary I can zero rate Supply (b).
    This means that the cost for the customer can be reduced by 25% while not affecting either mine or the service provider's revenue.

    However, in order to apply this analysis, it must be clear that I am acting as an agent. This requires me to do at least two things. First, to have a demonstrable relationship of principal and agent with the service providers - such as through an agency agreement. Second, to make the service provider invoice the customer directly, since if I were to invoice the customer then I would be acting as an 'undisclosed agent' and VAT would be chargeable on the supplies.

    That was hard at work at times but rewarding! Thanks for the initial link, Scalloway...
     
    Posted: Feb 11, 2018 By: IPR Member since: Jan 7, 2018
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