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Help and Advise needed on VAT issue
lindajames

10+ Year Member



 
Msg#: 960 posted 5:01 pm on Jul 7, 2003 (gmt 0)

I currently have a business set up in the U.K. I've been trading for two years now and my company offers website membership to worldwide customers. I was told by my accountant that I didnt need to worry about VAT or register for VAT until i've made something like 52,000 (which i have not yet made, ive still got ages to go before i get there)

But I am very confused about the overall VAT issue and how it works as i've never been involved in VAT before. I've heared about the new EU VAT Directive that takes affect from 1st July 2003, but does this affect me? does the 52,000 threshold still apply? if so, i guess i have nothing to worry about yet. However, I would like to prepare for when the time comes so if anyone can please give me some advise on exactly what is required I would really appreciate it.

Many Thanx

Cheers
Linda James

 

Shak

WebmasterWorld Senior Member shak us a WebmasterWorld Top Contributor of All Time 10+ Year Member



 
Msg#: 960 posted 5:05 pm on Jul 7, 2003 (gmt 0)

Linda,

as such you have nothing to worry about if you are under the VAT threshold.

however at the same time you are losing 17.5% on many of your purchases, which in effect you could be claiming if you were VAT registered.

in other words, you HAVE to be registered when you reach/hit the threshold, but you CAN register earlier and claim VAT back on the purchases.

as for the whole 1st July thing, I will let someone else give the finer points...

Shak

georgeek

10+ Year Member



 
Msg#: 960 posted 5:15 pm on Jul 7, 2003 (gmt 0)

Linda

...as for the whole 1st July thing, I will let someone else give the finer points...

As your business is 'set up' in the UK the new EU VAT Directive is of no concern, it does not apply to UK businesses.

If you trust your accountant follow his guidance and forget about VAT until you can see yourself going over the threshold.

lindajames

10+ Year Member



 
Msg#: 960 posted 5:45 pm on Jul 7, 2003 (gmt 0)

Yes i do trust my accountant, but i am just a bit curious as he doesnt really deal with internet businesses, most of my accountant's clients are high street shops.

georgeek, you mentioned that the new EU directive doesnt apply to me as I am in the UK, but how comes eBay and other UK websites have started actioning the new EU directive. I know that I am not currently VAT registered so it shouldnt bother me. but... I would like to get my website 'set up' in a way that it is ready for VAT (when i go over the 52,000 threshold.)

At the moment my website has been setup just as a simple shop where they can order online (NO VAT... NO CONFUSION..) but as I will have customers from all over the world, i want the website to be ready to collect VAT when i register for VAT, but i dont know exactly who I will need to collect which type of customers are VAT exempt. I've also heared that different customers from different EU countries have different rates that they have to be charged.

Really appreciate everyones help

Cheers
Linda

cornwall

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 960 posted 5:51 pm on Jul 7, 2003 (gmt 0)

Linda

The (charming) people from VAT do not charge for advice. If you live or work near a VAT office, then drop in and get the free advice straight from the horses mouth. Save you the hassle of worrying about conflicting advice here ;)

The VAT threshhold for compulsory registration is now, I believe, 56,000. Filling up the forms is time consuming, and you are liable to fines for late return of forms. So you need to weigh pros and cons of registration if you do it volunarily under the threshhold.

dmorison

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 960 posted 5:54 pm on Jul 7, 2003 (gmt 0)

As your business is 'set up' in the UK the new EU VAT Directive is of no concern, it does not apply to UK businesses.

I don't think you're correct - the new directive is about changes in the place of supply rule; and therefore has to concern UK and other EU businesses, although maybe not as much as non-EU companies!

1.4 Who is affected by these changes?
You will only be affected by these changes if you supply electronically supplied services or broadcasting services to, or receive them from, other countries whether EU or non-EU.

If you are a UK supplier of these services, you will no longer be required to account for VAT on supplies to:

businesses in other Member States; or
non-EU customers (except, in certain circumstances, where they are used and enjoyed in the UK).

(from [hmce.gov.uk...]

lindajames

10+ Year Member



 
Msg#: 960 posted 6:07 pm on Jul 7, 2003 (gmt 0)

hmmmm, can anyone plzzzz give me some plain english adivse on how I should prepare my website ready for this new so called EU directive. i am very confused as to how i am supposed to charge VAT when i register for VAT

Serio

10+ Year Member



 
Msg#: 960 posted 6:17 pm on Jul 7, 2003 (gmt 0)

Linda - I think Cornwall's advice is the best - call in your nearest VAT office - they are usually very helpful - and you don't want to fall foul of the VATman. That's the safest route. HTH

peewhy

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 960 posted 6:17 pm on Jul 7, 2003 (gmt 0)

Linda, the problem is you will be one of the 'pioneers'.

I seriously would get onto the HMCE (VAT) website
[hmce.gov.uk...] and go through the links with a fine tooth comb and then pester them for as much information as you need to know.

If it is a blanket 17.5% then the set up is going to be easier than if each country has a different VAT.

I would dare say that a few sites are already up and running, finding them is a different matter but VAT man might be able to point you in the right direction.

You know what, as you are going to be an unpaid tax collector, get the experts to spell it out for you :)

lindajames

10+ Year Member



 
Msg#: 960 posted 6:38 pm on Jul 7, 2003 (gmt 0)

ok, i will try and get in contact with a local VAT office tommorow. But... isnt it as simple as just charging 17.5% to UK customers, 21% to Ireland customers, 25% to Sweden customers etc...? if its like that then my website can be setup in way that if the customer registers with a UK address he/she will be charged 17.5% VAT etc...

Cheers
Linda

peewhy

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 960 posted 6:40 pm on Jul 7, 2003 (gmt 0)

It won't be long before the perfect software is on the market ... just after you spent fortunes sorting your site out ;)

georgeek

10+ Year Member



 
Msg#: 960 posted 7:13 pm on Jul 7, 2003 (gmt 0)

dmorison

As your business is 'set up' in the UK the new EU VAT Directive is of no concern, it does not apply to UK businesses.

I don't think you're correct - the new directive is about changes in the place of supply rule; and therefore has to concern UK and other EU businesses, although maybe not as much as non-EU companies!

The opening paragraph on HM Customs and Excise explanation on VAT On e-Services (VOES) says "VAT On e-Services (VOES) VAT On e-Services is a special Value Added Tax (VAT) scheme for non-EU businesses providing electronically supplied services to EU consumers (that is, private individuals and non-business organisations)."

There is in addition a separate change in EU place of supply rules for electronically supplied services and broadcasting services. The changes are straightforward and are explained quite simply for UK suppliers in this flow chart here [hmce.gov.uk].

peewhy

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 960 posted 7:36 pm on Jul 7, 2003 (gmt 0)

It seems that the guidelines, as usual are confusing. For clarification it is important to get the full facts straight from the horse's mouth.

With the best will in the world, laymen's advice is conflicting and ingorance is no excuse for breaking the law.

lindajames

10+ Year Member



 
Msg#: 960 posted 10:41 pm on Jul 7, 2003 (gmt 0)

this is very confusing. i spoke to someone who works for the local VAT office, and they said that say for instance you have a business in UK and someone from Sweden buys something from you, you cannot charge them Swedish VAT as you are not registered for VAT in sweden. Different people seem to have different opinions on this. it is silly the way they have introduced this new directive without making everyone fully aware of the damn thing. different people seem to say different things about it

georgeek

10+ Year Member



 
Msg#: 960 posted 4:37 am on Jul 8, 2003 (gmt 0)

Linda to be fair the VAT people telegraphed the details about the July 1st changes on their website ages ago and there has been pretty good press coverage. The reason you may feel left out of the loop is because you are not VAT registered already, if you had been you would have heard about them more than you needed to! Believe me when I tell you that when (if) you do register for VAT as a UK business you will long for the day when the VAT man didn't write to you. I must get a least a pamphlet a week on some change to the regulations or other. Fortunately ninety-nine times out of a hundred they are very specific and do not impinge on most business activity.

Look at the flow chart in the link of message 12 - it really is that simple.

lindajames

10+ Year Member



 
Msg#: 960 posted 12:40 pm on Jul 8, 2003 (gmt 0)

I've gone through that flow chart, and simply put If a customer is not from the EU they are not to be charged VAT, if they are from the EU, and are from U.K. they are charged 17.5%. However, if the customer is from another EU Member State and they are purchasing the service for non-business use then they are to be charged 17.5% UK VAT but if it is for business use then they are not to be charged VAT. Is this correct? so, whatever happens UK businesses have to charge a standard 17.5% to those who need to pay VAT is that correct?

Any comments would be appreciated

Cheers
Linda

cornwall

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 960 posted 1:13 pm on Jul 8, 2003 (gmt 0)

>>ok, i will try and get in contact with a local VAT office tommorow. But... isnt it as simple as just charging 17.5% to UK customers, 21% to Ireland customers, 25% to Sweden customers etc...? if its like that then my website can be setup in way that if the customer registers with a UK address he/she will be charged 17.5% VAT etc...

This is the problem with conflicting advice. "Normally" one charges UK rates, 17.5% on all transactions, and the customer in say Ireland accounts for that via their own system under "Vat paid to other European Union suppliers". You do not charge different ratees.

However I am not 100% certain that this applies to cyberspace transactions, so as I said before, try the Vat office (and get it in writing too)

georgeek

10+ Year Member



 
Msg#: 960 posted 1:33 pm on Jul 8, 2003 (gmt 0)

Yes Linda that is correct as I see it but as cornwall and others have said you will need your accountant and the VAT office to confirm that this is the case for your particular circumstances. Anything to do with TAX requires professional advice - please get some :) and good luck with the business!

peewhy

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 960 posted 2:06 pm on Jul 8, 2003 (gmt 0)

I think all other posts will be repeats now, unless we have a tax man, vat man and accountant on board.

The fact of the matter is; it is a minefield, few of us are qualified to give advice, we may talk from experience but as the goalposts move so does the law.

Advice must be taken from source and nowhere else. :)

Good luck.

If you shot a tax calculator and destroyed it... would the gun be a weapon of maths destruction? :) :)

lindajames

10+ Year Member



 
Msg#: 960 posted 6:13 pm on Jul 8, 2003 (gmt 0)

Gosh this is definately misleading. I spoke to someone at the VAT office and the guy said that since I am a UK business when I register for VAT all i need to do is charge 17.5% VAT to customers that are from UK and also issue them with a VAT invoice. Customers that are from another EU Member State are responsible for paying their local VAT for that purchase to their authorities. I was given the link to ht*p://www.hmce.gov.uk/forms/notices/741-11-12.pdf by the guy. This seems completely different to what has been discussed here.

peewhy

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 960 posted 8:47 pm on Jul 8, 2003 (gmt 0)

Then you have it from the horse's mouth:)

lindajames

10+ Year Member



 
Msg#: 960 posted 9:35 pm on Jul 8, 2003 (gmt 0)

one thing confusing about this is that, say if i bought something from another EU member state company. That company shouldnt charge me VAT instead I should pay VAT to HMCE for that particular purchase, thats a bit confusing aint it?

cornwall

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 960 posted 10:01 pm on Jul 8, 2003 (gmt 0)

>> if i bought something from another EU member state company <<

If you buy something (business related) from another EU state, they charge you Vat on it at their national rate, and you reclaim what you paid in their Vat from UK Customs and Excise on your Vat form (converted to sterling)

Its convoluted, but that's the way it goes - there is a special line for EU vat on your Vat form that is sent in periodically by you to C&E if you are VAT registered.

peewhy

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 960 posted 5:29 am on Jul 9, 2003 (gmt 0)

A whole batch of queries will derive from this new collection system. Work on the basis that very little will be logical and the moment you are VAT registered you become an unnpaid ... but accountable tax collector. The onus will be upon you to collect that tax an repay the VATman, in full and on time

Get as much information from them while you are keen to do this because you will dread them soon.

lindajames

10+ Year Member



 
Msg#: 960 posted 1:21 pm on Jul 9, 2003 (gmt 0)

I got an email from HMCE, i dont understand what they mean by:

"If you are a UK supplier, you will no longer be required to account for VAT on supplies to businesses in other EU Member States & non-EU customers"

Any suggestions?

Cheers
Linda

peewhy

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 960 posted 1:58 pm on Jul 9, 2003 (gmt 0)

Write to them and get a written response.

Don't take this the wrong way but we are internet related people not VAT experts. (unless there is a lurker that may help;) ). We can offer you a view point or case history perhaps, but you really need that information clearing up by the VAT people ... it is so important.

They have more powers than most official bodies and they use their powers, they can make life so difficult - I talk from experience.

They won't accept "blogger from websiteguru.com said it's okay if I don't charge VAT"

You need to rely on your accountant and VATman himself :)

EBear

10+ Year Member



 
Msg#: 960 posted 2:00 pm on Jul 9, 2003 (gmt 0)

georgeek, thanks for that link.

I've just spent the morning looking into this because we want to stop OV and Espotting from charging VAT at source, as we are in another EU country with a different VAT rate. We are also wondering why they have felt entitled to charge it for the last 8 months.

I'll let you know how I get on.

Fighting Falcon

10+ Year Member



 
Msg#: 960 posted 9:31 am on Jul 10, 2003 (gmt 0)

Hi

The requirement for businesses trading within the EU has not changed much. In fact if you were selling anything to the EU member states and the cutomer was a VAT registered person/business, you would merely be required to collect their VAT number and check that it was" looked genuine". By this I mean that you check that the format looked ok but was not required to go and verify every number that was put in by the customer. Your customer would then pay the VAT within his own country at the local rate of VAT.

If the customer was not registered for VAT, then you'd charge him the VAT at UK rate. But you'd make a record of the sale as being one going to the EU. The existing VAT return actually asks you to do this (BOX 8 of VAT return), as well as asking you to show own purchases from other EU states (box 2).

For sales outside the EU you automatically Zero Rate the VAT.

This in effect means that you will not be effected much by the new rules. The new rules will effect US based companies (google+aol etc) who are selling digital goods to EU member states. Now they too are being obligated to pay VAT as well.

I hope the above will be of some help, but like everyone else, I'd suggest you rely on your accountant for official advice.

EBear

10+ Year Member



 
Msg#: 960 posted 9:55 am on Jul 16, 2003 (gmt 0)

Just an update. Overture refunded all the VAT they had charged us this week. Of course we will now have to pay this to our own Revenue Commissioners at our local rate.

ESpotting have yet to reply (1 week on).

Crazy_Fool

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 960 posted 11:18 am on Jul 20, 2003 (gmt 0)

Linda - if you haven't done so already, go and see your accountant. I think you'll find it much simpler than it looks. Nobody here can give you a definite answer unless they work for HMCE or they are an accountant and can see your business / website details.

In general, you will charge 17.5% on all sales within the EU. You may not need to charge VAT to non-EU customers, but there is no requirement NOT to charge - therefore you can charge if you want to - it all helps the UK economy! But like others have said, you must see your accountant and check with HMCE.

July 1st has been planned and publicised for a long long time. It affects non-EU companies so shouldn't affect you.

As a brief summary:
Companies like AOL were able to provide services in the UK to UK consumers without charging VAT. They were US companies with a UK "subsidiary" targetting UK customers - to all intents and purposes, the UK "subsidiary" was run as a UK business, but they were technically exempt from UK VAT. I believe that the exemption was caused by "place of service" rules - I believe that AOL dial ups are routed through the USA, that Ebay servers are in the USA etc etc, meaning that because the service was performed outside the UK, they were technically exempt from UK VAT.

This meant they could provide the same services as UK companies, but cheaper - this gave them an advantage over UK companies.

The issue became fairly high profile a couple of years ago when a UK ISP (freeserve?) took HMCE to court for not forcing a US ISP (AOL UK?)to charge VAT. The matter was taken up by the EU, which looked into more aspects of it and came up with the July 1st proposals.

Under July 1st legislation, non-EU providers providing services to EU citizens / companies must register for VAT in the countries they supply services to and charge VAT at the appropriate rate for the country in which the service is used - ie, they must register with HMCE and charge 17.5% to UK citizens / consumers / businesses, they must register with the French VAT office and charge VAT at French rates to French consumers / business etc, and so on.

DISCLAIMER - this is from memory and I can't be certain that this is 100% accurate, but the info is all online if you want to search for it - I don't have time to search and verify everything :(

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