VAT on US Services?

[Fiona Miller]

We are a U.K. based company registered for VAT. A US based company, registered in the US, has issued us an invoice for supply of services and has included VAT on the agreed cost therefore upping the bill payable by 20%. The US company states that we can reclaim the VAT so no difference.

I do not think that a US company can charge VAT and certainly will not remit the "VAT". Therefore on our side it stands that we cannot recover the "VAT" element. I think that the US company can include its own sales tax which it should remit and we just pay the total invoice.

Is this correct, or does HMRC expect that the US company (or us in a rule similar to reverse charge) expect us to account somehow for this transaction. I think no.

I know there are different rules for EU suppliers but this is not relevant.

 

[Scalloway]

If the US company has supplied a service the place of supply will determine if VAT is payable. Does the invoice quote a UK VAT number?

 

[UK Contractor Accountant]

Does the US company quote a UK VAT Number on the invoice?

 

[Fiona Miller]

No UK VAT number which is why I don't understand how can they suggest they can charge VAT. It simply an invoice with the registered office in the US and what looks like a US sales tax number.

I think they are trying to be sneaky and inflate their price by 20% and if we were to attempt to reclaim the VAT and were audited it would be incorrect.

 

[Fiona Miller]

Actually sorry, on revisiting the invoice there is a VAT Tax ID No. which is in the format XXX XXXX XX.

When we originally budgeted for this cost the supplier stated N/A for VAT and has since said this was an error.

 

[StevensOnln1]

Use the link below to validate their VAT number and check it matches with their company details.

http://ec.europa.eu/taxation_customs/vies/vieshome.do

 

[Fiona Miller]

Thanks for that, I was not aware of that link. The VAT number is a valid UK number and this brings up a corresponding registered office in the UK.

So obviously then if it is UK to UK company the payment and reclaming of VAT is not an issue however would it make a difference where the services were provided, or it is defunct point as both the businesses are UK registered?

 

[Chart Accountancy]

If it is a service supplied from a UK based business to another UK business , they must charge vat and you can reclaim it if you have received a valid vat invoice for the service as per the link below

https://www.gov.uk/vat-record-keeping/vat-invoices

 

[Chart Accountancy]

With regard to your question on place of supply, this will be in the UK as the B2B rules will apply which means that the place of supply is where the customer belongs.The only B2B service taxable where performed is the admission to an event. All other B2B services are determined under the general B2B rule.

 

[Fiona Miller]

That's very helpful. If a US entity invoiced a UK company (and had no UK office or UK VAT number) I would expect to receive an invoice with US sales tax and we would pay the gross amount and not be able to reclaim anything through our tax system. is this the correct understanding? A US entity could not include VAT on an invoice unless it had a UK VAT registration?

 

[Chart Accountancy]

US company providing services to the UK, this will have zero sales tax from the US but you need to report it under the reverse charge on your vat return.

 

[Fiona Miller]

I thought the reverse charge was only for EU member states. One commercial question for anyone, the contract was agreed with the US company (the parent) and this is why it stated no VAT. The invoice is from the UK registered branch of the parent, thus VAT is charged. I would assume that the company cannot do this?

 

[Chart Accountancy]

The reverse charge applies where services are supplied in the UK by a supplier belonging overseas not only the EU. If the branch is providing the service, i dont see an issue receiving an invoice from them as they are under the control of the parent so the contact is with the parent company.