VAT Help - Client is outside of the UK but delivery of service is the UK

[tim nicebutdim]

Hi All,
I would be eternally grateful if someone can help me with what is probably a simple question but after trying to digest PN 741 I am stuck on something.


Please find some background on my company;
- We are a new company supplying news to financial institutions globally
- We are a UK Ltd company and VAT registered.


I have two scenarios which I am unsure about. One;
- we sell our news to a US company
- the contract is for the US parent with a US address
- the news service is being used in the UK
Q - Do we charge VAT on the invoice?
Under 2.2 of PN 741 it would appear we do; 'If the place of supply of your services is the UK, you must charge any UK VAT due and account for it to
HMRC regardless of where your customer belongs.'


Scenario two;
- we sell our news to a UK company
- the contract is for an entity of the parent company registered in Grand Cayman
- the news service is being used in the UK
Q - Do we charge VAT on the invoice?
My client says no as it is offshore but surely the same rule applies to scenario one?


Any help and insight on this matter is very much appreciated.
Many thanks,
Simon

 

[akirk]

We asked the vat man a similar question as we have clients in South America / Russia / New Zealand / USA, but they have websites which can be reached across the world.

Their response was - if the purpose of their website / their marketing includes or targets, or would accept custom from the UK then you need to charge them VAT on the invoice.

So supplying a website to someone in Argentina which is limited to an audience in that country, or across Latin America would not need VAT (according to them!), but a website in the USA who might have customers (whether free / or not) in the UK would...

Therefore technically the hypothetical website in Argentina - if it only sold to customers in Latin America - fine, but if it was information only and therefore attracted users from the UK, it would be chargeable.

talk about complex!

we just charge the VAT and the customer pays it...

Alasdair

 

[David Richards]

How are you supplying the news service to your clients? Additional rules apply to electronically supplied services, which means that the place where they are 'effectively used and enjoyed' can make a difference to the VAT treatment.

In VAT Notice 741A, you also need to look at section 15.12, section 17 and the decision table in section 23.4.

 

[tim nicebutdim]

Thanks and sorry I forgot to mention this. It is a combination of emails and a subscription website which contains databases and so falls under electronically supplied services.

Section 23.2 Table 1;
Customer Belongs - outside the EC and receives a B2B supply of services.
UK VAT Position - if the services are not used and enjoyed in the EC the services are outside the scope of UK and EC VAT
Additional Rules - Services used and enjoyed in the UK are supplied in the UK. Supplier accounts for any VAT due unless the customer provides a UK VAT registration number and accounts for UK VAT using the reverse charge

Please correct me if I am wrong but from the above table my US client uses and enjoys our news in the UK and therefore we either bill with VAT or the client uses the reverse charge.

What I am still unsure about is this whole offshore business. We have two hedge fund clients who both use very distinct address and billing information and both are in the Caymans. Their legal teams are adament that regardless of where the services is used they should not be charged VAT.

Thanks,
Simon

 

[David Richards]

What I am still unsure about is this whole offshore business. We have two hedge fund clients who both use very distinct address and billing information and both are in the Caymans. Their legal teams are adament that regardless of where the services is used they should not be charged VAT.

If they are outside the EC then they are outside the EC - so from a VAT point of view, I don't see why belonging in the Cayman Islands is any different from belonging in the US.

Have you directed your clients to the relevant bit of the VAT Notice? You might also want to direct them to VAT Notice 723A, as they may be eligible to reclaim the VAT from HMRC.