VAT rules for supplying services to EU (non-VAT registered)

[Statto71]

Hi,

I'm looking for a bit of advice please.

We are a non-VAT registered partnership in the UK. We supply translations and online language lessons (via Skype) to EU customers, both B2B and B2C.

As a non-VAT registered business we didn't need to worry about VAT on our invoices prior to Brexit, could someone please advise on whether that situation has changed for us post Brexit? I initially assumed it hadn't, but now I'm having doubts. I have read several websites and seem to be going round in circles with what appears to be conflicting information.

Many thanks in advance for any help.

 

[2JP]

My understanding is that if you are not VAT registered you never charge VAT on anything you sell; neither goods nor services.

 

[DontAsk]

My understanding is that if you are not VAT registered you never charge VAT on anything you sell; neither goods nor services.

That's right but if you are exporting goods to the EU they will now, potentially (depending how diligent customs staff are), be assessed for VAT at the border so customers will pay 20% more, or whatever the VAT rate is in the destination country.

This may affect your sales.

I can't comment on services.

 

[Deleted member 335219]

Hi

I've just been looking into the same issue for software sales. It seems to be a bit of a nightmare. I think not being VAT registered no longer applies to EU sales, since the VAT registration threshold is now a UK-only thing. I found this on the Institute of Chartered Accountants website (can't post a proper link as this forum won't let me):

w w w.icaew[dot]com/brexit/uk-vat-after-the-transition-period

"Sales of digital services"

"After 31 December 2020, all supplies of digital services to consumers in EU member states are liable for VAT in the consumer’s member state. The £8,818 annual threshold for cross borders sales of digital services to EU consumers no longer applies."

I'm hoping to find a payment processing solution that will deal with all this paperwork for me, as otherwise I will stop EU sales. The administration costs of processing EU VAT just don't make sense for a small business like mine. What a distraction all this stuff is

 

[2JP]

Note the original post was asking if VAT should be charged as a non VAT-registered entity. Whether the entity should be VAT registered, and where, what to report and when to invoice for VAT is a completely different set of questions.

https://www.gov.uk/guidance/the-vat...lying-digital-services-to-consumers-in-the-eu

https://europa.eu/youreurope/business/taxation/vat/vat-digital-services-moss-scheme/index_en.htm

Note that, at a glance, these two conflict on whether 'teaching' services come under the rules or not.

If you follow the link here (electronically supplied services - BUT is this the same as digital?):
https://ec.europa.eu/taxation_custo...-services/electronically-supplied-services_en

there is another link to a list:
https://ec.europa.eu/taxation_custo...g_online/electronically_supplied_services.pdf

Search for the word 'teaching' in the list. You will see there is a difference between human intervention teaching and non-human intervention teaching (automated).

Old doc but mentions MOSS and electronically supplied services:
https://ec.europa.eu/taxation_custo...information_microbusinesses_euvat_2015_en.pdf

Soon, the world will only be full of middlemen paid to decipher rules. What a sad place.

 

[Statto71]

Note the original post was asking if VAT should be charged as a non VAT-registered entity. Whether the entity should be VAT registered, and where, what to report and when to invoice for VAT is a completely different set of questions.

Thanks for the replies and the links.

It is indeed very complicated. I'm pretty confident we were doing things right before Brexit, if Brexit hasn't changed anything in this particular regard then we should be OK.

Thanks again.

 

[Damian-ELC]

From 1st July 2021, all UK >> EU B2C services will require the UK company to charge VAT based on the rate applied in the country where customer lives. There is no exemption threshold for low sales as we are now outside the EU, and it makes no difference whether the company is VAT registered in the UK or not, or the nature of the service. The collected VAT will then need to be refunded quarterly through the One Stop Shop in a convenient EU country (e.g. the Irish Revenue). The reverse charge still applies for UK >> EU B2B supplies (i.e. no VAT is charged).

I cannot post links, but search for the page "Modernising VAT for cross-border e-commerce".

 

[Damian-ELC]

The above was confirmed by HMRC today, based on our case of a UK company supplying proofreading services to EU businesses and customers. If in any doubt, call HMRC and request a callback from a VAT technician.

 

[Statto71]

The above was confirmed by HMRC today, based on our case of a UK company supplying proofreading services to EU businesses and customers. If in any doubt, call HMRC and request a callback from a VAT technician.

Thank you so much for this. I will call HMRC as you suggest, but looking at the "Modernising VAT for cross-border e-commerce" page there doesn't appear to much doubt that it will apply to us too.

Not great news really, the joys of Brexit!

Thanks again.

 

[nelioneil]

From 1st July 2021, all UK >> EU B2C services will require the UK company to charge VAT based on the rate applied in the country where customer lives. There is no exemption threshold for low sales as we are now outside the EU, and it makes no difference whether the company is VAT registered in the UK or not, or the nature of the service. The collected VAT will then need to be refunded quarterly through the One Stop Shop in a convenient EU country (e.g. the Irish Revenue). The reverse charge still applies for UK >> EU B2B supplies (i.e. no VAT is charged).

I cannot post links, but search for the page "Modernising VAT for cross-border e-commerce".

I thought this only applies to digital services, not all B2C?

 

[2JP]

https://ec.europa.eu/taxation_customs/business/vat/modernising-vat-cross-border-ecommerce_en
https://www.accountingweb.co.uk/tax/business-tax/brace-for-brexit-18-new-one-stop-shop

Why UK decided not to delay this in line with the EU, I do not know.