VAT when selling abroad

[Maslins]

Not something I deal with regularly, but got a new client where I'm going to need to understand this inside out.

Background facts
- UK Limited Company, incorporated in UK etc
- Director tax resident in Luxembourg (probably not significant for this question)
- Parts mainly bought in Germany but finished goods sold worldwide (it is goods not services being sold).

Can someone please either confirm or correct my understanding below:

1) Company registers for UK VAT as normal, does not need to register for VAT in any foreign company or anything fancy like that.

2) When selling to outside EU, no mention of VAT whatsoever goes on invoice, as sales are exempt.

3) When selling to inside EU (non-UK), if the customer has a valid VAT number for whichever country it is in, the sale is again exempt, but mention of the VAT number of the selling company and buying company should be put on the invoice.

4) When buying from within the EU (non-UK), no VAT should be charged to my client, hence nothing to reclaim, but if VAT is charged (for whatever reason) he cannot reclaim it on his UK VAT return.

5) When buying from/selling to UK (most of manufacturing will physically be done abroad) VAT recovered/charged as normal.

Re: 5 will it cause problems that items will be manufactured outside UK (by the main guy living in Luxembourg)?

Ok, I hope that makes sense. I know there's several bods on here that know their VAT inside out, could you please read over the above and tell me if/where my understanding is flawed!

Thanks in advance.

 

[frauke]

Yes that sounds about right.

You may have to do intrastat reporting "for the movement of goods and related services within the EU"

https://www.uktradeinfo.com/index.cfm?task=aboutIntrastat

 

[3pic]

Not something I deal with regularly, but got a new client where I'm going to need to understand this inside out.

Background facts
- UK Limited Company, incorporated in UK etc
- Director tax resident in Luxembourg (probably not significant for this question)
- Parts mainly bought in Germany but finished goods sold worldwide (it is goods not services being sold).

Can someone please either confirm or correct my understanding below:

1) Company registers for UK VAT as normal, does not need to register for VAT in any foreign company or anything fancy like that.

2) When selling to outside EU, no mention of VAT whatsoever goes on invoice, as sales are exempt. Not quite. Sales would be "outside the scope of UK VAT" (T9 on Sage) not exempt. If you treat as exempt in the accounts, that may restrict input tax recovery under partial exemption rules.

3) When selling to inside EU (non-UK), if the customer has a valid VAT number for whichever country it is in, the sale is again exempt, but mention of the VAT number of the selling company and buying company should be put on the invoice. These sales would be zero-rated, not exempt for the same reason detailed above. Invoice should state "subject to reverse charge, customer accounts for VAT" or words to that effect on the invoice to be compliant as well as evidence in the file of dispatch/sending of said goods to EU based customer.

4) When buying from within the EU (non-UK), no VAT should be charged to my client, hence nothing to reclaim, but if VAT is charged (for whatever reason) he cannot reclaim it on his UK VAT return. If UK buyer gives EU supplier their UK VAT number, EU supplier can zero rate the sale to the UK. UK buyer acounts for VAT in the UK (ie, they calculate UK VAT @ 15% and pay this over as output tax and also recover it as input tax so is VAT neutral but still must be done that way to be compliant).

5) When buying from/selling to UK (most of manufacturing will physically be done abroad) VAT recovered/charged as normal.

Re: 5 will it cause problems that items will be manufactured outside UK (by the main guy living in Luxembourg)?

We have to consider place of supply rules. If I am a customer of your clients and I buy their widgets, where d those widgets come from exactly?. If they are made in Lux and sent from Lux then the place of supply is Lux, not the UK. If they are made in Lux, sent over to UK warehouse for onward dispatch to UK customer then place of supply is UK. So maybe we need a little more info here as to where the goods are coming from and where they go (it may even be triangulation territory depending)

Ok, I hope that makes sense. I know there's several bods on here that know their VAT inside out, could you please read over the above and tell me if/where my understanding is flawed!

Thanks in advance.

I have made some comments for you within your original post.

 

[Maslins]

Extremely helpful 3pic, thanks.

Re: 2, 3 & 4 yes that all sounds vaguely familiar as stuff I learnt and forgot a few years ago, thanks!

Re: place of supply...at the moment this is a very small business. It's high end hifi equipment, but at the moment sales are minimal (turnover to date ~£10k). He's got a few distributors on board now spread across the world so turnover expected to increase fairly quickly.

His current plan is to remain in Luxembourg for the time being then move to UK permanently in 6-9 months (fairly set in stone as revolves around his wife and, I think, visa regulations). The production/factory is literally him in his spare room. So I guess for the time being the place of supply is Luxembourg, but will soon become the UK.

I think at present goods never enter the UK unless the end customer is in the UK (ie no UK warehouse that the goods go to first). He's only sold around 5 items to date, but that does includes at least 1 sale each to UK, EU, and US.

If things go to plan for him, by which I mean sales grow, but probably not that great still for at least 6 months, after which he moves to UK, I'm tempted to treat all supply as though it happened from within UK, as the value of goods sold prior to moving here should be low.

 

[RobertBruce]

Where is the bill raised? In UK? On a UK invoice?